Analysis of the film and video industry in Arizona

Analysis of the Film and Video
Industry in Arizona
December 2004
Prepared by
ESI Corporation
300 W. Clarendon
Suite 470
Phoenix, AZ 85013
www.esicorp.net
Analysis of the Film and Video
Industry in Arizona
December 2004
Prepared by
ESI Corporation
300 W. Clarendon
Suite 470
Phoenix, Arizona 85013
(602) 265-6120
www.esicorp.net
Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:
Dan Anderson
Assistant Executive Director for
Institutional Analysis
Arizona Board of Regents
Brian Cary
Principal Economist
Arizona Joint Legislative Budget
Committee
Lisa Danka
Director, Commerce & Economic
Development Commission
Arizona Department of Commerce
Kent Ennis
Economic Consultant
CH2M Hill
Wayne Fox
Director, Bureau of Business and
Economic Research
Northern Arizona University
James B. Nelson
Economic Development Manager
Salt River Project
William P. Patton, Ph.D.
Director of Economic Development
Tucson Electric Power
Elliott D. Pollack
Elliott D. Pollack & Co.
Brad Steen
Chief Economist
Arizona Department of
Transportation
Marshall Vest
Director, Economic and Business
Research
Eller College of Management
University of Arizona
Don Wehbey
Economist
Research Administration
Arizona Department of Economic
Security
Jim Wontor
Advisor, APS Forecasting
Arizona Public Service
2004 by the Arizona Department of Commerce. This document may be reproduced without restriction provided it is reproduced
accurately, is not used in a misleading context, and the author and the Arizona Department of Commerce are given appropriate
recognition.
This report was prepared for the Arizona Department of Commerce with funding from the Commerce and Economic Development
Commission. Elements of this report may be presented independently elsewhere at the author's discretion. This report will be
available on the Internet for an indefinite length of time at http://www.azcommerce.com. Inquiries should be directed to the Office of
Economic Information and Research, Arizona Department of Commerce, (602) 771-1161.
The Arizona Department of Commerce has made every reasonable effort to assure the accuracy of the information contained herein,
including peer and/or technical review. However, the contents and sources upon which it is based are subject to changes, omissions and
errors and the Arizona Department of Commerce accept no responsibility or liability for inaccuracies that may be present. THIS DOCUMENT
IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THE ARIZONA DEPARTMENT OF COMMERCE PRESENTS THE MATERIAL IN THIS
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Analysis of the Film and Video
Industry in Arizona
PREPARED BY:
ESI CORPORATION
300 West Clarendon Avenue
Suite 470
Phoenix, Arizona 85013
(602) 265-6120
www.esicorp.net
December 2004
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
i
EXECUTIVE SUMMARY................................................................................................1
Background ...........................................................................................................1
Economic Impact Findings..................................................................................1
Other Key Findings ..............................................................................................3
Recommendations ...............................................................................................4
I. INTRODUCTION...........................................................................................................8
Purpose of This Report .......................................................................................8
Study Process and Methodology .......................................................................8
Industry Trends ...................................................................................................11
II. ECONOMIC ANALYSIS OF THE FILM & VIDEO INDUSTRY IN ARIZONA.15
Employment and Wage Trends .......................................................................15
Economic Impact of the Film Industry.............................................................19
III. STRUCTURE OF THE FILM INDUSTRY IN ARIZONA...................................24
Film Festivals ......................................................................................................24
High Schools .......................................................................................................25
Community Colleges/Universities ....................................................................26
Production Companies ......................................................................................27
In-House Production ..........................................................................................29
Local Film Commissions ...................................................................................29
Film Industry Suppliers ......................................................................................31
Survey Findings Summary................................................................................33
IV. BEST PRACTICES/BENCHMARKS...................................................................34
Economic Vitality................................................................................................34
Film Commission Services ...............................................................................41
Support and Marketing ......................................................................................42
Best Practices Summary...................................................................................44
V. ARIZONAS COMPETITIVE ADVANTAGES AND DISADVANTAGES........46
Filming in Arizona ...............................................................................................46
Film Commission Services ...............................................................................47
Location Factors .................................................................................................47
Researching Locations ......................................................................................47
Incentives.............................................................................................................48
Local Hiring .........................................................................................................48
Perception of Arizona ........................................................................................49
Competitive Advantages/Disadvantages Summary.....................................49
Table of Contents
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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VI. FINDINGS AND RECOMMENDATIONS.............................................................51
Summary of Findings .........................................................................................51
Recommendations .............................................................................................53
APPENDIX A ECONOMIC IMPACT MODEL ...................................................A-1
APPENDIX B SURVEY INSTRUMENTS...........................................................B-1
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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Table 1 Definition of the Film Industry.......................................................................1
Table 2 Economic Impact of the Film Industry on the Arizona Economy -
2003 ................................................................................................................2
Table 3 Definition of the Film Industry.......................................................................8
Table 4 Survey Response Summary.......................................................................10
Table 5 Definition of the Film Industry.....................................................................15
Table 6 2003 Average Annual Salaries for the Film Industry in Arizona ...........17
Table 7 Film Industry Employment Distribution in Arizona - 2003 ......................17
Table 8 Average Annual Salaries in 2003 Film Industry in Metro Phoenix,
Metro Tucson & Balance of the State .....................................................19
Table 9 Economic Impact of the Film Industry on the Arizona Economy -
2003 ..............................................................................................................20
Table 10 Total Economic Impact of the Film Industry on the Arizona
Economy by NAICS 2003.......................................................................20
Table 11 Total Economic Impact of the Film Industry on the Arizona
Economy by Region - 2003 .......................................................................21
Table 12 Impact of Arizona Film Festivals in 2003................................................22
Table 13 Top Issues by Type of Survey Respondent...........................................33
Table 14 Film Production Incentives for Selected States.....................................40
Table 15 Comparison of Budget and Staff Size for Selected States ..................45
Figure 1 Average Employment and Establishments ............................................16
Figure 2 Arizona Film Industry Employment Distribution 2000 through 200318
Figure 3 Arizona Film Festivals Total Revenues and Expenses in 2003 .......25
Figure 4 Percentage of Respondents Who Own Various Types of Equipment 26
Figure 5 Sources of Recruiting that Producers Utilize ..........................................28
Figure 6 In-House Film/Video Production in 2003.................................................30
Figure 7 Percentage of Local Film Commissions by Types of Funding .............31
Figure 8 Percentage of Respondents Who Supplied the Following Segments
of the Film Industry .....................................................................................32
Figure 9 Arizona Department of Commerce Film Office Budget........................37
List of Figures
List of Tables
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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EXECUTIVE SUMMARY
BACKGROUND
Arizona has a rich history in the film industry dating back to the early westerns,
and has been the location for feature films, television series and commercials. In
recent years, the amount of filming in the U.S., in general, and Arizona, in
particular, has declined as production companies moved to lower cost locations, such
as Canada and Mexico. The Film Industry in Arizona is important to the economy
in that it brings in dollars from other states and countries to be spent here on
payroll and film production services. It also has a firm basis in technology and
innovation / entrepreneurship, and has both urban and rural components. While
these are generally understood benefits of the industry, the Arizona Department of
Commerce Film Office seeks a study that will define the film and video industry as a
cluster, quantify the impacts of the industry, and analyze the industry in terms of
state support programs (such as workforce development and education).
ECONOMIC IMPACT F INDINGS
The economic analysis of the film industry begins with the development of a
definition of the film industry by the North America Industrial Classification System
(NAICS) Codes, which were reviewed and approved by the client. Based on analysis
of NAICS industries, the Film Industry is defined as the group of three industries
shown in Table 1.
Table 1 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
The Film Industry had a significant economic impact on Arizona in 2003. With total
wages of approximately $21.9 million, the Film Industry, in and of itself, generated
over $107 million in direct economic activity (or output) throughout the State of
Arizona. In addition to the 612 film industry jobs, the Film Industry is responsible
for the maintenance of an additional 1,092 indirect and induced jobs in Arizona.
These jobs include those occupations that supply goods and services to companies in
the Film Industry as well as jobs supported by the spending of the wages from the
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
2
direct and indirect jobs. This means that for every 100 Film Industry jobs in
Arizona, another 182 jobs exist to service and support the Film Industry. Overall,
approximately 1,704 total direct and indirect jobs in Arizona were supported by the
Film Industry during 2003. These jobs generated about $56.6 million in total wages
and $201.5 million in total economic activity (see Table 2 below).
Table 2 Economic Impact of the Film Industry
on the Arizona Economy - 2003
Type Jobs Total Wages Output
Direct 612 $21,885,900 $107,345,900
Indirect 665 $20,856,400 $59,407,300
Induced 427 $13,856,600 $34,698,300
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
Film festivals held in Arizona also contribute to the Arizona economy. In 2003, the
three operating film festivals brought in $240,000 in revenue and had $220,000 in
expenditures of which $170,000 was spent in Arizona. The average length of each
film festival was three days with total attendance at these film festivals estimated at
19,800 people for 213 films.
The Arizona Department of Commerce tracks the value of film production
expenditures in the state generated from out of state production companies. The
last full year in which data is available is fiscal year 2003, during which there were
a total of 427 completed projects translating into an estimated economic impact of
$41.6 million being spent on wages to local crews as well as the procurement of local
goods and services. While there is no way of knowing precisely how much of the
Arizona film industry total impact (Table 2) can be attributed to out of state
production, the survey results do reveal anywhere from 10.9% to 25.7% of revenues
were derived from out of state sources.
It is evident that out of state production is important to the local economy and it
helps stimulate the growth of the local film industry. Both are needed to help
sustain one another. Fostering the growth of Arizonas film industry will require a
two pronged approach; one that focuses on strategies for strengthening the local film
industry and the other promoting Arizona to out of state production companies.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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OTHER KEY F INDINGS
Since 2000, employment declined in Arizonas film industry by about 26.3% from
830 jobs in 2000 to 612 in 2003. By comparison, total employment in Arizona
increased by 1.4% during this same period. Indeed, most of the job losses
occurred in Metro Phoenix. Some 199 film industry jobs were lost in Metro
Phoenix between 2000 and 2003. The balance of the state also experienced loss of
jobs, as this area had 20 fewer jobs in 2003 than it did in 2000. Metro Tucson did
experience growth in film industry employment, but just slightly, as Metro
Tucson only gained 2 net jobs from 2000 to 2003.
In addition to the statewide loss of film industry jobs, average salaries in the film
industry declined statewide between 2000 and 2003. Average annual salaries for
film industry jobs in Arizona as a whole dropped by 24.3% to $35,773 in 2003.
Metro Phoenix and the balance of the state saw declines in average salaries.
From 2000 through 2003, average salaries for film industry jobs in these regions
decreased by 21.5% and 41.6%, respectively. Metro Tucson, on the other hand,
experienced an average salary increase of 7.6% from 2000 to 2003. The
discrepancy between job losses in Metro Phoenix and the balance of the state and
job gains in Metro Tucson can possibly be attributed to the qualifications of
certain segments of workers. With the increased reliance on the highly technical
post-production process, the demand for these workers has increased. And with a
large percentage of the highly technical workers located in Metro Tucson and
Metro Phoenix, it stands to reason that the change in their employment trends
has an influence on the overall trends in Film Industry employment, and why
the statewide differences in employment trends exist.
Runaway production, where films to be shown in the U.S. are produced outside of
the U.S., is a national phenomenon. Runaway production occurs because non-
U.S. locations, such as Canada and New Zealand, are less expensive than U.S.
locations. As more film productions are lured outside the U.S., the number of film
productions taking place in the U.S. is dwindling. As a result, there is intense
competition among the states trying to bring film productions to their state.
In order to lure film productions, states have undertaken aggressive advertising,
incentive, and marketing campaigns. These efforts have resulted in revamped
websites which include photos of locations, information on permits and
regulations, and directories of local technicians/crew just to name a few.
Financial incentives are also being offered. These incentives include sales tax
exemptions, income tax credits, and low-interest loans for film production
activities. In addition, certain states have helped develop the local film
technician and crew jobs as well as those companies that provide equipment to
film productions. Nationwide marketing and previous filming experience has
proven to be an effective means to increase word of mouth which appears to be
one of the primary factors that producers rely on when considering a location.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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The states analyzed in this report consider the film industry as a major
contributor to their economies because film production tends to bring money into
the state from out-of-state sources. In Colorado, for example, about 75% of
production company receipts came from out-of-state sources during 2001. By
comparison, based on surveys conducted by ESI, only 21% of Arizona production
company receipts came from out-of-state sources. As the number of film
productions taking place in Arizona has dwindled in recent years, Arizona
production and supplier companies have been forced to go where the work is.
Currently, a majority of work within close proximity to Arizona is located in New
Mexico.
New Mexico is one of the more recent examples of the dramatic impact the film
industry can have on an economy given a certain mix of incentives, advertising,
and accessibility of information. Near the end of 2002, New Mexico enacted
legislation calling for sales tax exemptions, income tax credits, and no -interest
loans on film productions taking place in New Mexico. The result was a ten-fold
increase in economic activity in the state. In 2002, the film industry spent about
$8 million in New Mexico. During 2003, the first year the incentives took place,
film production picked up dramatically and spending reached approximately $80
million. Indeed, if film production spending in New Mexico can go from $8 million
to $80 million in one year, there is no reason to believe this could not happen in
Arizona.
The main concern of Arizonas resident film industry is the apparent lack of
production business that is brought to Arizona. The most frequently stated
reasons for the lack of production business in Arizona include lack of resources to
thoroughly support and promote the state, lack of incentives, and lack of facilities
and professional technicians. It was indicated that the stigma with Arizona is
that the industry as a whole thinks there are not enough skilled crew in Arizona
to support the needs of out-of-state productions. Compounding this problem is
the lack of production projects in the state which has led to an exodus of talented
professionals who have followed the business elsewhere.
RECOMMENDATIONS
The Arizona Film and Video Industry is at a crossroads. Fierce competition from
abroad and technological advances in filmmaking have had an adverse impact on
employment in the state. A number of initiatives need to occur in order for Arizona
to regain its competitiveness, promote technology and innovation; encourage local
and independent filmmaking; and attract more out-of-state film productions that
enhance local economies and create jobs statewide.
In spite of the fact that jobs in this industry have declined over the last several
years, Arizona has a solid foundation to build upon, which includes its rich history in
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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filmmaking, the current base of film technicians/crews, equipment, and facilities, as
well as diversity of filming locations and weather.
The reality of the film industry in the U.S. is that states are competing for a limited
number of film productions as more and more production takes place outside the
U.S. As a result, recognizing the significant impact of film production on their
economies, states have enacted aggressive marketing campaigns to maintain and
enhance the film industry. Indeed, if film production spending in New Mexico can
go from $8 million to $80 million within one year, there is reason to believe that the
film industry could also have such an impact on Arizona.
Fostering the growth of the film and video industry in Arizona will require a
collaborative effort that includes support from private business, government as well
as education. With that in mind, the following recommendations include ways
Arizona can emulate or even improve on best practices in other states, approaches
for promoting local filmmaking, and address identified deficiencies through a team
effort.
ESTABLISH COLLABORATIVE PARTNERSHIPS
Work to unite the disparate pieces of the film industry in the state by soliciting
their involvement in the development and implementation of a Film in Arizona
marketing campaign.
Encourage education and private business to work together to establish
mentoring, internship and apprenticeship opportunities.
Facilitate a seamless integration of service delivery by identifying the weaknesses
in the film making supply chain and work to overcome those weaknesses.
FACILITATE AND PROMOTE LOCAL FILMMAKING
Stimulate the creation of local filmmaking by working with the local film festivals
and have an annual statewide competition which would culminate at an annual
film festival with prizes presented by the Governor.
Support local nonprofit organizations that promote the development of local
filmmaking, such as the newly located Blacktop Films. This support could
include helping to publicize the non-profit service to providing financial
assistance.
Develop an outreach program aimed at the Arizona film industry which would
promote the small business assistance programs offered by the Arizona
Department of Commerce.
Create a revolving loan fund in conjunction with lending institutions that
independent filmmakers could access to help with production and distribution
costs of their films.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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Ensure the availability of future workers by encouraging the expansion of
educational offerings at the high school and community college levels.
Help Arizonas film industry stay competitive by promoting the availability of
workforce development dollars to the industry.
Inaugurate an annual filmmaking camp to foster interest among the states
youth. This could be done through a collaboration of the Arizona film industry
and the colleges.
ESTABLISH INCENTIVES WITH A RETURN ON INVESTMENT
Create an incentive program to attract out of state production companies that
provides a tax rebate for utilizing Arizona talent, technicians/crews, and
equipment.
Ensure that incentives are understandable and easily obtainable. The types,
amount, eligibility, and qualifications of incentives offered should be clearly
documented on the Commerces website. There should be as little administration
as necessary in order to apply for incentives. Incentives are effectively useless if
production companies perceive there to be too much red tape to be worth the
effort.
Support incentives that are geared toward smaller, resident independent film and
video productions, such as loaning out equipment.
MARKETING AND PROMOTION
Based on the surveys conducted for this study, Arizona does not appear to be on the
radar screen of most film production companies compared to other states. A more
targeted, effective marketing strategy is needed to promote Arizonas diversity of
locations, professional technicians/crews, and film festivals.
Develop a branding and marketing plan to promote film production in Arizona.
Implementation strategies should be stratified to target the various types of
filming activity (feature films, commercials, television and cable, etc).
Increase the amount of resources and marketing dollars to effectively compete for
film business.
Attend national and regional trade shows and work to establish personal
relationships with production companies by scheduling regular sales calls.
Advertise in national magazines that target the film production industry, such as
Hollywood Reporter and Daily Variety.
Promote Arizona as having more than just desert locations. Highlight places such
as Flagstaff and Sedona for forested locations and Scottsdale and Tucson for
urban landscapes.
Help the film festivals secure big name signature sponsors, an example is Ralph
Laurens 20 year sponsorship of the annual Telluride Labor Day Film Festival.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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Promote local film festivals in national publications to draw larger audiences
nationally and internationally.
Provide more resources and staffing to increase the level of customer service.
New Mexico was identified a number of times for their apparent willingness to
help in any way they can to bring a production to their state. This higher level of
customer service requires substantially more resources and staffing than
currently available at the Arizona Department of Commerce Film Office.
Develop a standardized tracking system for the State and Local Film offices to use
annually in monitoring the value of out-of-state production. Information to be
gathered should include revenue by project type (commercials, documentaries,
films, television, videos, post-production), the number of projects, and the number
of production days.
FILM OFFICE WEBSITE
Interviews with producers revealed that the website for a states film office is one of
the starting points in scouting locations for film productions. An organized, welldesigned
website with a wealth of information is one of the most effective means at
marketing Arizona as a film destination. Following are suggestions for
improvement to the current Arizona Department of Commerce website.
Create a website link that is easy-to-use with all information available within two
or three clicks. An unorganized, confusing website is a deterrent to most users.
Include nearly all the location resources a production company could ever need to
know about filming in Arizona such as the following:
=>Online picture gallery of locations in Arizona
=>All pictures should be downloadable
=>Streaming video with state footage
=>Clear description of permits for filming in Arizona
=>Online permit applications including filing instructions
Provide an online, searchable directory of up-to-date production resources
including contact information for technicians/crews, equipment suppliers, studios,
and trucking, etc.
Supply an online directory of hotels, restaurants, entertainment venues, and any
other attraction a potential production would desire while filming in Arizona.
Include a clear discussion of the incentives available in Arizona to out of state
production companies
Create a website with an identifiable, easy-to-remember name. For example,
Nevadas website is at www.NevadaFilm.com and Floridas website is at
www.FilminFlorida.com.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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I. INTRODUCTION
PURPOSE OF THIS REPORT
The purpose of this report is to determine the impact the Film Industry has on
Arizonas economy. In addition to quantifying the Film Industrys economic impact
on the Arizona economy, this report will assess Arizonas competitive advantages
and disadvantages with respect to the desirability of filming in Arizona. Industry
research, telephone interviews, and web-based surveys were conducted to help make
recommendations for enhancing Arizona as a film destination.
STUDY PROCESS AND METHODOLOGY
The study process undertaken was multi-faceted and incorporated original research
through the use of surveys and telephone interviews as well as a quantitative
analysis determining the economic impact of the film industry on the States
economy. To accomplish this, a number of methodologies were used to measure the
impact of the Film Industry on Arizonas economy and assess the States competitive
advantages and disadvantages.
The methodology for each section of this report is summarized on the following
pages.
CHAPTER II : ECONOMIC ANALYSIS OF THE FILM INDUSTRY
The economic analysis of the film industry begins with the development of a
definition of the film industry by NAICS Codes, which were reviewed and approved
by the client. Based on analysis of NAICS industries, the Film Industry is defined
as the group of three industries shown in Table 3.
Table 3 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
Covered Employment and Wages data (formerly ES202) obtained from the Arizona
Department of Economic Security was used to perform a quantitative analysis of the
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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industry in terms of total number of establishments, employment, and wages from
2000 through 2003 (the latest data available).
For the most current year available (2003), direct employment data was used to
calculate the economic impact of the film industry in Arizona. Direct employment
data from the industry was analyzed through the IMPLANPro economic impact
model to document indirect and induced multiplier effects of the industry to the
State. Refer to Appendix A for further detail.
CHAPTER III: STRUCTURE OF THE FILM INDUSTRY IN ARIZONA
A variety of survey instruments were used to gather information from a number of
groups with ties to the film industry. These groups included production companies,
film industry suppliers, in-house production, and film commissions. Other groups
include universities and colleges, school districts, and film festivals.
This set of survey analyses document the structure of the film industry, and
additionally was used as one method of collecting insights from knowledgeable
individuals concerning the states competitive advantages and disadvantages.
The Arizona Department of Commerce identified an appropriate universe (group of
people to be surveyed) for each survey and provided contact information.
The surveys were web-based, and featured automatic tabulation and reporting of
defined answers (i.e. specific responses to fill in the blank questions are not used to
tabulate by, but are recorded in the dataset). The surveys were conducted between
May 6, 2004 and June 8, 2004. A total of 113 surveys across all film industry groups
were completed resulting in an overall response rate of 16.9% (see Table 4). Based
on this firms experience in conducting surveys and the overall response rate
achieved in these surveys, the results from these surveys reasonably represent the
trends and opinions of all entities included in the sampled population.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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Table 4 Survey Response Summary
Film Industry Group
Survey
Size Respondents
Response
Rate
Production Companies 346 53 15.3%
Film Industry Suppliers 240 32 13.3%
In-House Production 16 8 50.0%
Film Commissions 17 7 41.2%
Universities and Colleges 17 3 17.6%
School Districts 30 7 23.3%
Film Festivals 4 3 75.0%
Total 670 113 16.9%
Source: ESI Corporation
CHAPTER IV: FILM COMMISSION BEST PRACTICES FROM OTHER STATES
In conjunction with the Arizona Department of Commerce, six other states were
identified in order to obtain best practice information. These six states are regarded
by the profession as having the best film programs and have been extremely
successful in attracting production to their state. Phone interviews were conducted
with the film and economic development departments of these states to learn about
their program activities, size of staff and funding levels, incentive programs,
successes and the like.
CHAPTER V: ARIZONAS COMPETITIVE ADVANTAGES AND DISADVANTAGES
The competitive advantages and disadvantages of Arizona were addressed through
interviews with knowledgeable individuals both locally and out of state. The key
factors and how Arizona is rated differs for feature films as compared to
commercials, for example.
In consultation with the Arizona Department of Commerce, various sub-industries
were identified. The key sub-industries included commercials, industrials/corporate
films, documentaries, and feature films. Other sub-industries include sports
programming, television and cable, and music video.
CHAPTER VI: CONCLUSIONS AND RECOMMENDATIONS
A set of recommendations has been made based on the research performed in the
previously noted sections. These recommendations include ways to emulate or even
improve on best practices in other states, approaches for addressing identified
deficiencies, and methods for tracking success.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
11
INDUSTRY TRENDS
FILM INDUSTRY OVERVIEW
The film industry in the United States generates over $20 billion in direct economic
activity each year, according to a 1999 study from the Monitor Company. This study
(The Monitor Report) was commissioned by the Directors Guild of America and the
Screen Actors Guild of America to quantify the economic effects of runaway
production on the U.S. The film industry includes production and distribution of
films, television (series and TV movies), and commercials. Between 1990 and 1998,
the U.S. film industry experienced rapid growth. According to the Monitor Report,
the number of productions (film, TV, and commercials) developed in the U.S.
increased by about 50% from 716 productions in 1990 to 1,075 in 1998. Feature
films comprise a significant portion of these productions and overall expenditures.
Feature film productions in the U.S. spent an estimated $11 billion in 1998 (the
latest data available). These expenditures include payroll, rent, and supplies just to
name a few. These supplies can range from hotel rentals, car rentals, and catering
to freeway tolls, construction materials, and wardrobe. The ripple effect of this
spending is significant. According to the Monitor Report, the $11 billion in direct
spending on feature film production in the U.S. had an estimated ripple effect of $16
billion in 1998. This additional economic impact includes the overall economic
output of those businesses supplying goods and services to feature film production
and the spending of the wages of the workers in the film industry and the suppliers.
Including the estimated ripple effects, feature film production contributed an
estimated $27.7 billion to the U.S. economy in 1998. Additional economic activity is
generated from television and commercial production. Estimates of the economic
impact of these types of productions were unavailable.
The latest data available from the U.S. Bureau of Labor Statistics indicates that in
2003 there were nearly 365,000 jobs directly involved in the U.S. film industry,
which is slightly down from 2002. There are two types of jobs in the film industry:
above-the-line workers and below-the-line workers. Above -the-line staff generally
includes the directors, writers, producers, and primary actors. These are the major
players in a production. Below-the-line workers include non-primary actors,
technicians, assistant directors, artists, specialists, unit production managers, and
set movers, just to name a few. These jobs are behind the scene s of the productions.
According to industry experts, approximately 70% to 80% of these below-the-line
workers are hired locally where the production takes place. These workers typically
do not follow the production when it changes location. In addition, these below-theline
jobs are relatively high paying. According to the U.S. Bureau of Labor
Statistics, the average hourly wage for these types of jobs was $20.75. By
comparison, the average hourly wage was $13.44/hour for a typical private sector job
in the U.S.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
12
RUNAWAY PRODUCTION
There are several factors that producers consider in choosing a location for a
potential production. Over the past 30 years, production within the U.S. has
concentrated in California, New York, Florida, North Carolina, Texas, and Illinois.
Producers have generally favored these states because producers like to work where
they live, and most live in the U.S. production clusters. These states are considered
production clusters because they contain all the resources needed as well as
financing, development, and distribution assets. According to the latest data from
the U.S. Department of Commerce, these states account for 88% of the motion
picture industrys revenue. They also supply 80% of the total employment and 65%
of the total number of establishments in the industry. These states are typically
favored because they fit the location needs of the particular production. Other states
have attracted film production by promoting scenery and location attributes in their
states that are not generally considered by most producers. In addition to these
location attributes, the overall cost of producing in these locations, relative to the
expected revenues from the project, is of primary importance. Producers are always
searching for low cost locations. Over the past decade, U.S. productions have moved
outside the U.S. into countries such as Canada, Australia, and New Zealand. This
phenomenon is called runaway production.
Runaway production occurs when a film that is released and developed in the U.S. is
filmed in a foreign country. Most of the runaway productions occur due to cost
factors. Locations in Canada, Australia, and New Zealand, for example, are sought
after due to the fact that the cost of production is lower than that in the U.S. The
frequency of this type of runaway production increased rapidly between 1990 and
1998. In 1990, about 100 films were produced outside the U.S., according to the
Monitor Report. In 1998, the latest data available, the number of films produced
outside the U.S. increased by approximately 185% to 285 films. If it were not for
lower costs of production and other factors in those countries, these films would have
been produced in the U.S. The foregone economic activity related to these
productions is the result of the migration of film productions outside the U.S.
According to the Monitor Report, the 285 films that were produced outside the U.S.
in 1998 had an overall estimated economic impact of $10.3 billion. This foregone
economic impact (or output) includes $2.8 billion in direct spending and the ripple
effects of that direct spending totaled about $5.6 billion.
INCENTIVES FOR RUNAWAY PRODUCTIONS
According to film industry experts, Canada, Australia, and New Zealand are the
most popular countries for runaway production. These countries have adopted
production plans that draw U.S. producers typically through the use of incentives.
These incentives range from tax breaks on production spending to fee and permit
waivers. When the effects of exchange rates, lower production costs, and incentives
are considered, total production costs for a typical film production are about 25%
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
13
lower than if the production were to take place in the U.S. A study conducted by the
Directors Guild of America and the Screen Actors Guild indicated that Canadian,
Australian, and U.K. currencies have all declined by 15% to 23% since 1990 relative
to the U.S. dollar. When you factor in the already low wage rates in Canada and
Australia the overall savings becomes very significant.
According to the Monitor Report, Canada adopted a successful strategy in drawing
U.S. producers to move their productions to Canada. Canada took an integrated
approach toward luring U.S. film productions. As Canada used a series of incentive
programs to attract producers, they included qualifying requirements to promote
local hiring. This requirement for local hiring helped give local crews in Canada the
necessary experience in film production that they otherwise would not have
received. These incentive programs and local hiring qualifications also resulted in
the development of the local physical infrastructure needed to support future film
productions. Now that Canadian crews have the necessary experience in film
production and the physical infrastructure is developed, there is no difference
between the quality of filmmaking in Canada versus the U.S.
Canadas incentive programs include federal and provincial tax credits of 22% to
46% of labor expenses, which yield up to a 10% decrease in total expenses. U.S. film
productions taking place in Canada nearly tripled between 1990 and 1998 (the latest
data available). In 1990, about 63 productions took place in Canada. By 1998, about
232 productions took place in Canada. Indeed, Canada captures an estimated 81%
of the total number of U.S. runaways. Other countries, such as Australia, which
capture about 10% of U.S. film production, have begun to copy this strategy to gain
more of the U.S. production market.
TECHNOLOGICAL ADVANCES
Recent advances in technology have created remarkable changes in the processes of
film production. Contemporary filmmakers are now able to take advantage of new
technology to reduce costs, increase productivity among their staff, and better choose
production locations. Many filmmakers use new post-production advances to be able
to scan film onto a videotape format and store the data on computers. This creates a
box environment where producers and specialists can collaborate on different
aspects of post-production over long distances. This has decreased the dependence
on large, local post-production facilities. In addition, producers can use postproduction
service providers from around the world as opposed to only locally.
Virtual environments and sound stages have also decreased the dependence on
location for film producers. They are able to reduce production costs by filming
scenes in front of green screens or using computers to digitally modify the
surrounding area. The latest advancement is in digital filmmaking, which enables
filmmakers to instantly review their footage, cutting down on production time and
cost. The digital medium requires a new type of workforce that consists of
individuals with technical backgrounds.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
14
In this technologically advanced environment, skilled workers and a technical
infrastructure are necessary for a viable production market to exist. Locations that
have these resources are attractive to producers who are filling their crew locally.
These resources commonly develop into production clusters, which contain all of the
resources required. These resources include access to financing, development, and
distribution resources. Production clusters are an advantage to producers and
typically result in lower overall costs of production.
SHIFT IN TELEVISION PROGRAMMING
A noticeable trend in recent years has been a shift in programming from movie of
the week to reality based television shows. One reason for the movement toward
reality-based programming is due to changes in the audience. People are
demanding more unpredictability in their television shows as opposed to the
conventional linear programming, and reality shows provide this. In addition, many
reality shows provide the audience a degree of control in the final outcome of the
program. Shows such as Big Brother and American Idol allow audience voting and
participation in determining the eventual winner of these shows. Consequently,
advertisers and sponsoring partnerships have become increasingly eager to align
themselves with these types of programs. The increased revenue opportunities from
advertisers have subsequently led to the creation of more and more reality shows.
In addition to increased advertising revenue, reality television shows have also
proven to be less expensive to produce than more conventional forms of
programming. A typical one -hour drama on a commercial television network costs
around $2 million an episode. Studios will often lose money on the first airing of an
episode, but recoup that cost by selling the show for syndication. Reality TV shows,
however, can be produced for considerably less. Many of these shows cost only
around $1 million per one-hour episode. The reasons for this cost disparity are
simple: such shows have no regular cast to pay and often have a minimal writing
staff. They can also sometimes save on other production costs by using preexisting
homes or other similar means to avoid expensive set construction and labor costs.1
1Day, Dwayne. The Space Review www.thespacereview.com/article/165/1.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
15
II. ECONOMIC ANALYSIS OF THE FILM & VIDEO INDUSTRY IN
ARIZONA
EMPLOYMENT AND WAGE TRENDS
FILM INDUSTRY DEFINITION
The Arizona Department of Economic Security (DES) collects employment and wage
data through its quarterly Covered Employment and Wage (formerly ES-202)
survey. This data pertains to workers covered by Arizona unemployment insurance
laws and Federal civilian workers covered by Unemployment Compensation for
Federal Employees program. Employment and wage data is collected from
establishments in all 15 counties in Arizona and categorized by industry using the
North American Industry Classification System or NAICS. The data includes
average number of establishments, average employment, and total quarterly payroll
(or wages).
DES reports employment and wage data by NAICS from the year 2000 through the
present. Historical data prior to 2000 is reported by SIC code (the classification
system that NAICS replaced). Due to the fact that there is no perfect conversion of
SIC to NAICS data, the time series is discontinuous. For purposes of this analysis,
covered employment and wage data from 2000 through third quarter 2003 (the
latest data available) will be used.
Based on analysis of NAICS industries, the Film Industry is defined as the group of
three industries shown in Table 5.
Table 5 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
Due to data disclosure requirements, data on industries 51211, 51219, and 51212
are combined into industry 512 -- throughout this report.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
16
STATE OF ARIZONA
In 2003, there was an average of 612 jobs within 177 establishments in the Film
Industry in Arizona Figure 1 shows the average number of jobs and establishments
in the film industry in Arizona from 2000 to 2003.2 Since 2000, average employment
in the Film industry declined in Arizona. Average employment decreased by 26.3%
from 830 jobs in 2000 to 612 jobs in 2003.3 By comparison, total employment in
Arizona increased 1.4% during this period.
While overall Film Industry employment declined between 2000 and 2003, the
number of Film Industry establishments in Arizona increased, albeit just slightly.
In 2000, there was an average of 169 establishments in the Film Industry in
Arizona, according to Arizona Department of Economic Security (DES). In 2003,
however, there was an average of 177 Film Industry establishments in Arizona.
Figure 1 Average Employment and Establishments
2 This data does not reflect those who are self-employed within the Film Industry and therefore
understates the number of people who make their living in the film and video business.
3 This decline could be attributed to, in part, the closing of the Fox Animation Studio.
Figure 1 - Average Employment and Establishments
Film Industry in Arizona
830
724
642
612
175 177
169 167
50
150
250
350
450
550
650
750
850
950
2000 2001 2002 2003
Average Employment
50
100
150
200
250
300
Average Establishments
Avg Employment Avg Establishments
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
17
Overall between 2000 and 2003 the Film Industry lost approximately 218 jobs or
26% of total jobs. During this timeframe the average annual salaries also declined
(Table 6). According to DES the average annual salary declined by 24.3% from just
over $47,252 in 2000, to $35,773 in 2003. Runaway production can in part be
blamed for the decline in jobs, but other factors include local production talent
leaving the state due to lack of work in Arizona, and inadequate resources to
effectively market the state to promote production business.
Table 6 2003 Average Annual Salaries for the
Film Industry in Arizona
NAICS Industry Name
2003 Average
Annual Salary
% chg from
2000 to 2003
512 - -
Motion Picture & Video
Production and Distribution $35,773 -24.3%
Source: Arizona Department of Economic Security.
METRO PHOENIX, METRO TUCSON, AND BALANCE OF THE STATE
The Arizona Department of Economic Security reports employment and wage data
by county. Film Industry employment and wage data was aggregated by three
regions of the state including Metro Phoenix (Maricopa and Pinal counties), Metro
Tucson (Pima County), and the Balance of the State (all counties except Maricopa,
Pinal, and Pima). Due to data disclosure requirements, all 12 rural counties in
Arizona are combined into the Balance of the State.
Table 7 shows the distribution of Film Industry employment in Arizona as of 2003.
There were about 370 Film Industry jobs (or 60.5% of total) in Metro Phoenix.
Another 158 jobs (or 25.8% of total) were located in Metro Tucson and 84 jobs (or
13.7% of total) in the Balance of the State.
Table 7 Film Industry Employment Distribution in
Arizona - 2003
Area
Average
Employment
% of
Total
Metro Phoenix 370 60.5%
Metro Tucson 158 25.8%
Balance of State 84 13.7%
Arizona Total 612 100.0%
Source: Arizona Department of Economic Security.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
18
Between 2000 and 2003, Arizona Film Industry jobs shifted out of Metro Phoenix to
Metro Tucson and the Balance of the State (Figure 2). The percentage of Arizona
Film Industry employment located in Metro Phoenix dropped from 68.7% in 2000 to
60.5% in 2003. During this period, about 199 Film Industry jobs were lost in Metro
Phoenix. On the other hand, the percentage of Arizona Film Industry jobs located in
Metro Tucson increased between 2000 and 2003. Metro Tucsons share of Arizona
Film Industry employment increased from 18.8% in 2000 to 25.8% in 2003. During
this period, Film Industry employment in Metro Tucson grew, but only by 2 jobs.
The Balance of the State has also captured a greater share of Film Industry jobs in
Arizona. However, the Balance of the State actually lost 20 jobs between 2000 and
2003, while the actual percentage of Arizonas Film Industry employment located in
the Balance of the State increased, from 12.5% in 2000 to 13.7% during 2003.
Figure 2 Arizona Film Industry Employment Distribution 2000 through 2003
Average annual salaries in the Film Industry in Metro Tucson and the Balance
of the State were between 48% and 55% of the average salary in Metro Phoenix
(Table 8). In 2003, the average annual salary for Film Industry jobs in Metro
Phoenix was $44,001. By comparison, the average annual salary was $24,222 in
Figure 2 - Arizona Film Industry Employment Distribution
2000 through 2003
68.7%
18.8%
12.5%
61.9%
23.2%
14.9%
61.5%
22.0%
16.5%
60.5%
25.8%
13.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Metro Phoenix Metro Tucson Balance of State
% of Arizona total .
2000 2001 2002 2003
Source: Arizona Department of Economic Security
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
19
Metro Tucson and $21,172 in the Balance of the State. Indeed, overall average
salaries in the Film Industry declined between 2000 and 2003 in all areas of the
State. During this period, while average salaries increased by 7.6% in Metro
Tucson, the decline in average salaries was 21.5% in Metro Phoenix and 41.6% in
the Balance of the State.
Table 8 Average Annual Salaries in 2003
Film Industry in Metro Phoenix, Metro Tucson &
Balance of the State
Region
2003 Average
Annual Salary
% chg
from
2000 to
2003
Metro Phoenix $44,001 -21.5%
Metro Tucson $24,222 7.6%
Balance of State $21,172 -41.6%
Arizona $35,773 -24.3%
Source: Arizona Department of Economic Security.
ECONOMIC IMPACT OF THE FILM INDUSTRY
The 2003 employment and wage data noted in the previous section was used to
calculate the economic impact of the Film Industry in Arizona. Direct employment
data from the industry was analyzed through the IMPLANPro economic impact
model to document indirect and induced multiplier effects of the industry to the
State. For a more detailed discussion of how the IMPLANPro model works, refer to
Appendix A.
As shown on Table 9 the Film Industry employed about 612 direct jobs in Arizona in
2003, on average. With total wages of about $21.9 million, the Film Industry, in and
of itself, generated over $107 million in direct economic activity (or output) through
the State of Arizona in 2003.
In addition to the 612 direct jobs, the Film Industry is responsible for maintaining
another 1,092 indirect and induced jobs in Arizona in 2003. These jobs include those
jobs that supply goods and services to those companies in the Film Industry as well
as those jobs supported by the spending of the wages from the direct and indirect
jobs. This means that for every 100 Film Industry jobs in Arizona, another 182 jobs
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
20
are needed to service and support the Film Industry. Overall, approximately 1,704
total jobs in Arizona were supported by the Film Industry during 2003.
These 1,704 direct and indirect jobs attributed to the Film Industry in Arizona
generated nearly $56.6 million in wages and $201.5 million in total economic
activity.
Table 9 Economic Impact of the Film Industry
on the Arizona Economy - 2003
Type Jobs Total Wages Output
Direct 612 $21,885,900 $107,345,900
Indirect 665 $20,856,400 $59,407,300
Induced 427 $13,856,600 $34,698,300
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
Table 10 illustrates the total economic impact of the Film Industry. Overall, NAICS
512-- (Motion Picture & Video Production and Distribution) provided a substantial
economic impact (in terms of total output) during 2003. Total economic activity (or
output) for this industry is estimated at $201.4 million. Approximately 1,704 total
jobs in Arizona were supported by this industry with total wages exceeding $56
million.
Table 10 Total Economic Impact of the Film Industry
on the Arizona Economy by NAICS 2003
NAICS Industry Name
Total
Jobs
Total
Wages
Total
Output
512--
Motion Picture & Video
Production and Distribution
1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic Security; IMPLAN.
Table 11 shows the estimated total economic impact of the Film Industry by the
three regions of the State. These regions include Metro Phoenix (Maricopa and
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
21
Pinal counties), Metro Tucson (Pima County), and the balance of the state (all
counties excluding Maricopa, Pinal, and Pima).
Approximately 67.8% of all jobs (or 1,155) supported by the Film Industry in Arizona
were located in Metro Phoenix. Metro Tucson captured about 23.4% of all jobs (or
399) affected by the Film Industry in Arizona. Also, some 149 jobs, or 8.7% of all
Film Industry jobs in Arizona, were situated in the Balance of the state. The
Balance of the state includes those counties not located in Metro Phoenix and Metro
Tucson.
The jobs affected by the Film Industry in Metro Phoenix generated over $43 million
in total wages and over $152 million in total economic activity. In addition, total
wages amounted to approximately $9.9 million in Metro Tucson and $3.3 million in
the Balance of the state. Total economic activity is estimated at $37.0 million and
$12.4 million in Metro Tucson and the balance of the state, respectively.
Table 11 Total Economic Impact of the Film Industry on the
Arizona Economy by Region - 2003
Area
Total
Jobs
Total
Wages
Total
Output
Metro Phoenix 1,155 $43,359,700 $152,051,200
Metro Tucson 399 $9,889,400 $36,997,200
Balance of the State 149 $3,349,800 $12,403,100
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
FILM FESTIVAL IMPACT
A separate analysis was performed for the most recent year of each the large film
festivals in Arizona. These film festivals include the Phoenix Film Festival,
Scottsdale International Film Festival, Sedona International Film Festival, and
Arizona International Film Festival. A web-based survey was used to obtain
information on these film festivals. This information ranged from attendance and
gross revenue to number of volunteers and number of films shown during 2003.
Only three of the four festivals participated in the survey.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
22
During 2003, attendance at the three film festivals was estimated at 19,800 people.
These festivals lasted about 18 days and showed 213 films. These film festivals are
mostly operated by volunteers. With only eight full time employees, about 230
volunteers ran the film festivals. According to the film festivals that responded to
this survey, in 2003 total gross revenue was approximately $240,000 with expenses
of $220,000 of which 76% was spent on goods and services in Arizona.
Approximately 7 percent of the film festival attendees were from out of town and
stayed an average of three nights resulting in $441,829 in direct spending.4 By
comparison, film festivals had a much greater impact on the Colorado economy.
During 2001, the latest data available, Colorado film festivals had attendance of
87,000 and generated about $12.6 million in spending. Some 60 full time employees
and 1,800 volunteers worked at these festivals.
Table 12 Impact of Arizona Film
Festivals in 2003
Total attendance 19,800
Percent from out of town 7%
Films shown 213
Days of festival 18
Full time employees 8
Volunteers 230
Gross revenue $240,000
Total expenses $220,000
% of expenses spent in Arizona 76.6%
Source: ESI Corporation
OUT OF STATE PRODUCTION IMPACT
The Arizona Department of Commerce tracks the value of film production
expenditures in the state generated from out of state production companies. The
last full year in which data is available is fiscal year 2003, during which there were
a total of 427 completed projects translating into an estimated economic impact of
$41.6 million being spent on wages to local crews as well as the procurement of local
4 Direct spending of overnight visitors is based on $106.26 spending per person per day. Data supplied
from the Arizona Tourism Statistical Report 2003, Arizona Office of Tourism and D.K. Shifflet and
Associates.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
23
goods and services. While there is no way of knowing precisely how much of the
Arizona film industry total impact (Table 11) can be attributed to out of state
production, the survey results do reveal anywhere from 10.9% to 25.7% of revenues
were derived from out of state sources suggesting that there is a basic (export)
component to the industry.
It is evident that out of state production is important to the local economy and it
helps stimulate the growth of the local film industry. Both are needed to help
sustain one another. Fostering the growth of Arizonas film industry will require a
two pronged approach; one that focuses on strategies for strengthening the local film
industry and the other promoting Arizona to out of state production companies.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
24
III. STRUCTURE OF THE FILM INDUSTRY IN ARIZONA
A set of surveys was conducted to gather information on the structure of the film
industry and to collect insights from knowledgeable individuals concerning the
states competitive advantages and disadvantages. The surveyed groups include the
following.
Film Festivals
High Schools
Community Colleges/Universities
Production Companies
In-house Production
Local Film Commissions
Film Industry Suppliers
Following are summaries of the surveys conducted.
FILM FESTIVALS
An email survey was distributed to contacts of four Arizona film festivals. Three of
the four surveys were received yielding a 75% response rate.
Film festival directors throughout the state were asked questions regarding their
festival events, which included questions about budgets, formats, employees, and
attendees. In the attempt to measure growth of these film festivals, some survey
questions focused on the first year and most recent year (2003) of the festival.
The oldest Arizona film festival began in 1990, and was a lone event until two more
festivals began in 2001. The film festivals have a small number of full time
employees. These festivals more heavily rely on volunteers. In 2003, the festivals
employed about 8 full time employees and utilized some 230 volunteers. According
to the film festivals that responded to the survey, about 7% of all festival attendees
are from out-of-town with the remaining 93% Arizona residents. The out-of-town
attendees typically used a hotel room for about 3.3 nights, on average. Attendance
for all film festivals has grown 164% since their inception.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
25
In 2003, the three festivals that responded to the survey took in approximately
$240,000 in gross revenue in 2003. In addition, the film festivals spent about
$170,000 (or 76% of total expenses) on goods and services in Arizona. See Figure 3.
The festivals were asked questions regarding the films shown and their relationship
to the state of Arizona in the year 2003. According to the respondents, an average of
29% of all films shown at the film festivals was shot either partially or entirely in
Arizona. Also, of all films shown during 2003, about 22% were produced by Arizona
producers.
Figure 3 Arizona Film Festivals Total Revenues and Expenses in 2003
HIGH SCHOOLS
A survey was emailed to 30 school districts, most of which were located in the
Phoenix metro area, to ascertain the curriculum and facilities in place to prepare the
workforce in the field of film production. A total of 7 surveys were completed
yielding a response rate of 23.3%. High schools were asked questions regarding their
film/video/digital programs, facilities, and students. The respondents indicated
enrollment ranging from 1,100 to 2,800 students. Of the schools surveyed, all
respondents offered camera operation programs and 71% offered film editing
programs. Film processing and animation were the least offered programs with 14%
and 29%, respectively, of respondents. (See Figure 4).
Out of the seven schools surveyed, six schools maintained a production facility. Of
those schools that maintained production facilities, all had video production
equipment and 86% had post-production equipment for video. Other film related
skills offered in some of the high schools surveyed were DVD production, multimedia
Figure 3: Arizona Film Festivals
Total Revenue and Expenses in 2003
$240,000
$220,000
$170,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Total Revenue Total Expenses Total Arizona Expenses
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
26
authoring, graphics, broadcast production, multi-camera broadcast, and non-linear
editing.
Figure 4 Percentage of Respondents Who Own Various Types of Equipment
COMMUNITY COLLEG ES/UN I V E R S I T I E S
Seventeen universities and community colleges received surveys via email. Three
surveys were returned from community colleges (none from the universities) for a
response rate of 17.6%. These surveys included questions regarding program,
facilities, faculty, and students as they apply to the film/video/digital industry. The
survey respondents were a part of programs that started as early as 1975 and as late
as 1985.
The respondents each offered a different focus in their programs ranging from
cinema history and editing/broadcasting/film/screenwriting to hands-on production
skills for video and media. The respondents offered degrees such as Associate in
Arts, Associate of Applied Science, and Video Production Technology. In addition,
Figure 4: Percentage of High Schools
who own Various Types of Equipment
0% 20% 40% 60% 80% 100%
Production Facilities -
Film
Post-Production Facilities
- Editing (Film)
Post-Production Facilities
- Film Processing
Production Facilities -
Sound Stages
Post-Production Facilities
- Sound Sweetening
Production Facilities -
Digital/HD
Post-Production Facilities
- Editing (Digital/HD)
Post-Production Facilities
- Editing (Video)
Production Facilities -
Video
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
27
two-thirds of respondents offered production-specific skill sets including Film/TV
studies, Broadcast Journalism, Telecommunications, and Media.
PRODUCTION COMPANIES
An email survey was distributed to 346 production companies within the state. A
total of 46 surveys were returned, which yielded a response rate of 15.3%. These
surveys included questions regarding size, specialty, financial inputs/outputs,
production output, and hiring practices. Nearly 50% of the production companies
that responded were started between 1990 and 2000. In addition, approximately
32% of the production companies were started between 1980 and 1990, 11% began
after 2000, and the remainder (7%) was created prior to 1980. Of the 46 companies
surveyed, 39 strictly produce, 6 companies both produce and distribute, and one
company declined to answer.
Nearly 80% of all respondents took part in commercial and industrial/corporate film
production and/or distribution. In 2003, the respondents indicated they took part in
550 projects spanning the industry from feature films to internet productions.
The production companies surveyed were primarily small businesses and had
anywhere between one and 28 full time employees with an average of approximately
three full time employees. The primary sources for employee recruitment included
word-of-mouth (76% of all respondents), professional associations (39%), and
internships (24%). See Figure 5. The revenues of all production activities in 2003
met with varied responses. Of the production companies surveyed, only 39 provided
revenue detail. Among this group of 39 respondents, revenue during 2003 totaled
approximately $10.1 million with a top revenue estimate of $3.25 million. An
average of 25.7% of this gross revenue was derived from out-of-state sources.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
28
Figure 5 Sources of Recruiting that Producers Utilize
Figure 5: Sources Used by Producers for Recruiting
Workforce
0%
0%
0%
2%
2%
4%
4%
4%
7%
11%
17%
24%
39%
76%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Community Bulletin
Radio
TV
Job Agencies
Other Training Schools
Advertisements
Internet
Trade Publications
Apprenticeships
Technical Schools
College/University
Career Centers
Internship Programs
Professional
Associations
Word-of-Mouth
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
29
IN -HOUSE PRODUCTION
Email surveys were distributed throughout the state to 16 non-film related
organizations, public and private, with in-house production capabilities. In-House
production refers to an organization that has its own production facility and
produces its own media without having to contract out-of-house for services. A 50%
response rate was achieved for this survey. The in-house production survey included
questions regarding their facilities, equipment, production types, and costs.
In 2003, 75% of the in-house production was of industrial/corporate films and
training videos (See Figure 6). The estimated fixed cost including payroll for these
companies and organizations in 2003 ranged from $10,000 to $1,000,000 with an
average of $230,000. Outsourced production for the same year ranged from $0 to
$200,000 with an average of approximately $53,000. Of the outsourced production,
roughly 43% was outsourced to companies within the State of Arizona.
Most of the in-house production facilities surveyed were formed during the late-
1980s. There was an average of five full time employees per production facility
surveyed. About 63% of the respondents owned production facilities that were less
than 5,000 square feet, 13% had 5,000 to 10,000 square feet, and 25% owned
between 10,000 and 15,000 square feet. Every company and organization surveyed
described their production facility equipment as video based while one respondent
also had digital/HD equipment.
LOCAL FILM COMMISSIONS
An email survey was transmitted to 17 Film Commissions within the State
of Arizona. A total of 7 surveys were gathered yielding a 41.2% response rate. Film
Commissions throughout the state were asked questions regarding their employees,
financial inputs/outputs, and latest projects. The Film Commissions surveyed
started operations between 1974 and 1996. Over half (57%) were started during
the 1980s, 14% in the 1970s, and 29% in the 1990s. The funding for the
film commissions or primary contact positions were funding by various sources
(Figure 7).
The Commissions were asked questions regarding their 2003 budget. Six reported
budget figures ranging from $1,000 to $200,000. The Film Commissions surveyed
had about two full time employees, on average, and focused on film projects. Three
Film Commissions revealed that commercials produced and/or post-produced in
Arizona had a total budget of over $30 million in addition to just over $31 million for
feature films in the state.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
30
Figure 6 In-House Film/Video Production in 2003
Figure 6: In-House Film/Video Production in 2003
0%
0%
0%
0%
0%
13%
38%
38%
38%
50%
50%
75%
75%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Infomercials
Interstitial
Sports Programming
Music Video
Other:
Commercials/Promos
Documentaries
Stock Footage
Internet
Television and Cable
Stills
Industrial/Corporate Film
Training Videos
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
31
Figure 7 Percentage of Local Film Commissions by Types of Funding
FILM INDUSTRY SUPPLIERS
A survey was emailed to 240 supply companies that primarily serve the
film/video/digital industry. A 13.3% response rate was achieved with 32 completed
surveys. Industry supply companies were asked questions regarding their services,
employees, and financial inputs/outputs.
Approximately 44% of respondents provided equipment, camera, or lighting/grip.
Some 33% of respondents indicated they provide trucks/mobile equipment, and 11%
of respondents described sound stage/studio with another 11% listing film/tape postproduction
as their core business. The companies surveyed provide a wide range of
services to many parts of the film/video/digital industry. The majority of
respondents, about 97%, primarily served the segment of the film industry that
creates commercials. (See Figure 8).
Figure 7: Percentage of Local Film Commissions
by Types of Funding
0%
0%
14%
14%
14%
14%
29%
43%
57%
0% 10% 20% 30% 40% 50% 60%
Economic Development
Grants
Tourism Board
County Funding
Local Fund Raising
Other, Please Specify
Private Sector
Chamber of Commerce
City Funding
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
32
The surveyed companies had between one and 400 full time employees. The average
number of employees per company was 17. The estimated total revenue in 2003 was
almost $5.1 million. An average of 10.9% of this gross revenue was derived from
out-of-state sources.
Figure 8 Percentage of Respondents Who Supplied the Following Segments of
the Film Industry
Figure 8: Percentage of Respondents
Who Supplied the Following Segments
of the Film Industry
21%
38%
45%
48%
52%
55%
66%
69%
69%
69%
76%
76%
83%
97%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other, please specify:
Sports Programming
Stock Footage
Internet
TV/Cable: Episodic
TV/Cable: Movie of the Week
Music Videos
TV/Cable: Single/Special
Short Films
Documentaries
Feature Films
Stills
Industrials/Corporate Films
Commericals
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
33
SURVEY FINDINGS SUMMARY
Overall, the respondents of these surveys agreed that Arizonas assets for a film
production could be more effectively promoted. When asked about the top issues
facing the state film industry, the main concern of the respondents was the apparent
lack of production business that is brought to Arizona. This lack of business has
manifested into intense competition for the limited number of productions that take
place in Arizona. As a result, budget undercutting and substantially low budgets
have effectively priced certain firms out of the market. The most frequently stated
reasons for the lack of production business in Arizona specifically include lack of
support and promotion from the State, lack of incentives, and lack of a directory of
facilities, locations, and professional technicians.
A majority of the respondents perceived that there is a lack of support at the state
level in the form of promotion and advertisement of Arizonas locations and
professional technicians. It was indicated that the stigma with Arizona is the
industry as a whole thinks there are not enough skilled people in Arizona.
Compounding this problem is the lack of production projects in the state which has
led to an exodus of talented professional s who have followed the business elsewhere.
The following Table 13 highlights the top responses by respondent type. Clearly the
number one issue mentioned was the perceived absence of support or importance
placed upon film industry, followed by the lack of marketing, and the lack of
incentives.
Table 13 Top Issues by Type of Survey Respondent
Issues
Film
Festivals
High
Schools
Comm.
Colleges
Prod.
Cos
In-
House
Prod.
Local Film
Commissions
Industry
Suppliers
Lack of Marketing X X X X X
Negative Image X
Lack of Incentives X X X X
Permits X X
Regulations X X
Lack of Business
Directory X X X
Lack of Location
Directory X X X
Lack of Projects X X X X
Lack of Funding X X X
Competition X X X X
Support/Importance X X X X X
Source: Surveys conducted by ESI
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
34
IV. BEST PRACTICES/BENCHMARKS
In order to benchmark Arizonas Film Office in terms of the services it offers and its
related economic impact to the state, a group of states, who are primary U.S.
competitors to Arizona was targeted, to reveal their successes at luring film
production. Based on feedback from the Arizona Department of Commerce and the
industry, telephone interviews were conducted with film commission offices in
Texas, Utah, Nevada, New Mexico, Florida, and Colorado. They were asked
questions regarding the economic impact of the film industry, financial incentive
plans used in their state, services that the film commission offers, and details on
their staff, budget and marketing plans.
ECONOMIC VI T A L I T Y
Similar to Arizona, the film industry has significant economic impacts to the
economies of the following states.
TEXAS
In Texas, the film industry generated approximately $165 million in direct spending
in 2003, according to the Texas Film Commission. This spending is higher than
previous years and is generally attributed to the growth of local film technician and
equipment jobs. As a result, hiring of local crews typically accounts for 80% of the
total crew working on productions in Texas. According to the Texas Film
Commission, approximately 45 to 55 productions take place in Texas each year.
Indeed, according to the Texas Film Commission, this level of production is
anticipated to remain unchanged during 2004. To measure the economic impact that
a production has on the state, the Texas Film Commission speaks directly with the
producers to obtain the production budget information. They do not use multipliers
in their estimates.
UTAH
In 2003, about 135 productions took place in the State of Utah. These productions
generated about $80 million in revenue. Over the past decade, the film industry in
Utah generated approximately $1 billion in revenue. During 2004, revenue from
film productions is expected to be half of that experienced in 2003, according to the
Utah Film Commission. They attributed the decline to the Screen Actors Guild
strike, runaway production, and the increase in reality-based television. The
movies-of-the-week segment of the film industry, historically a major component of
Utahs film industry, declined over the past few years due to the increasing amount
of reality television shows. This situation is expected to adversely affect film
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
35
production activity in Utah in 2004. Another component of the film industry in
Utah is its strong crew base. According to the Utah Film Commission, the
availability of local crews attracts a significant number of productions to Utah.
Indeed, local hiring accounts for as much as 90% of all hiring on a production. To
determine the economic impact, the Utah Film Commission communicates directly
with the producers and uses a worksheet that details the amount of money spent
inside the state. They do no t use multipliers in their economic impact estimates.
NEVADA
The film industry in Nevada generated about $100 million in revenue in 2003.
Annual revenue from the film industry nearly doubled during the past four years.
The Nevada Film Commission revealed that heavy marketing and promoting by its
staff was a major contributing factor to the increase in revenue from film production.
This marketing resulted in about 500 film productions in Nevada each year. The
film industry significantly impacts tourism in Nevada. According to the Nevada
Film Commission, tourism in Nevada (particularly in Las Vegas), improved due to
the production of movies such as Oceans 11 and TV shows like MTVs The Real
World. These productions are essentially free publicity. When calculating the
economic impact, the Nevada Film Commission supplies producers with a form
explaining the information they need. If this information is not available from the
production company, the Film Commission uses a formula provided by the
Association of Film Commissioners International (AFCI) which is based on the type
of picture being produced. They do not use multipliers to determine the complete
economic impact estimate.
NEW MEXICO
In New Mexico, the economic impact of film production increased ten-fold between
2002 and 2003. According to the New Mexico Film Commission, the economic
impact in 2003 was $80 million compared to $8 million in 2002. The substantial
jump in economic activity from the film industry was primarily attributed to the new
aggressive incentive plan enacted in 2001. This plan incorporates sales tax breaks
and a no-fee incentive when filming at any state site. The New Mexico Film
Commission obtains economic impact information directly from the production
companies. They do use multipliers in their impact estimates, but during a
telephone interview declined to define them specifically.
COLORADO
According to the Colorado Film Commission, the film industry had an economic
impact of approximately $30.4 million in 2002. Over the past two decades, the film
industry in Colorado was unstable, but experienced a noticeable growth of
production between 1985 and 1990. Recently, the general television industry switch
from production of movies-of-the-week to reality-based television shows also had a
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
36
negative impact on the Colorado economy. Reality television shows typically have
lower production costs and generate less money into the state economy than do
movies-of-the-week. In 2001, approximately $205.5 million in wages and 3,933 jobs
were generated from film and video production, freelance crews, and suppliers. It is
estimated that 90% of total crew costs are paid to in-state workers, which positively
impacts the Colorado economy. According to the Colorado Film Commission, the
state experienced production in almost every part of the state. Indeed, 40 out of the
64 counties were locations for production in 2002. To estimate the economic impact
the Colorado Film Commission uses follow up phone calls to obtain all relevant
information from the production companies. They do not use any multipliers in
their analysis.
FLORIDA
In Florida, film industry employment nearly doubled between 1995 and 2001. The
years 2001 and 2002 were difficult due to the anticipation of the SAG and DAG
strike, 9/11, the dot.com bust and slowing of the national economy. Unfortunately,
staff at the Florida Film Commission was reluctant to be interviewed.
ARIZONA
The Arizona Department of Commerce tracks the value of film production
expenditures in the state. The last full year in which data is available is fiscal year
2003. During 2003 the estimated value of production expenditures was $41.6
million, attributed to 427 film productions. This figure is conservative in that it
includes only those expenditures reported to the Department by the production
companies. The trend in production in Arizona is down from 2001, in which $63.6
million of filming was conducted. A partial list of the types of productions in 2001
includes seven feature films, one telefeature, episodes from four television series,
and one television special.
The decline in production in Arizona can be attributed to several things. First, the
migration of producing movies-of-the-week to realty based television, runaway
production, and lastly dramatic budget cuts and staff turnover of the Film Office
within the Arizona Department of Commerce. The budget for film promotion has
decreased by more than 45% since fiscal year 2001 as can be seen in Figure 9.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
37
Figure 9 Arizona Department of Commerce Film Office Budget
Figure 9 - Arizona Department of
Commerce Film Office Budget
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
38
INCENTIVES
Financial incentives have a substantial impact on drawing production, according to
film commission directors. In an effort to lure production, most states interviewed
adopted legislation that incentivizes production companies mainly in the form of tax
breaks. Following is a discussion of the incentives offered by the group of states
included in the interviews. Table 14 includes a summary of these incentives.
TEXAS
The incentive plan in Texas includes an on-the-spot 100% sales tax exemption from
state and local taxes. It also includes a hotel occupancy waiver when film crews stay
for 30 or more consecutive days. Producers can also receive a refund on fuel used in
generators, boats, and other unlicensed vehicles.
UTAH
Utah offers a sales and use tax exemption, in the form of a 10% rebate on dollars left
in the state, and up to 12% if the story line is set in Utah. The rebates are typically
administered at the end of a production. This is new legislation in Utah. After one
week of being enacted, the number of film applications increased dramatically.
NEVADA
According to the Nevada Film Commission, Nevada currently does not offer any
financial incentives for filmmakers. This is due to a lack of funding and legislation
to support an aggressive incentive plan. The Film Commission is currently
researching the types of incentives that would most benefit their state.
NEW MEXICO
Based on interviews and research conducted by ESI, New Mexico has one of the
most well known and most aggressive incentive plans. Two types of tax incentives
are offered.
A gross receipts tax deduction between 5% and 7% is taken at the point of
sale.
A 15% film production tax credit. This is a fully refundable credit of 15% of
eligible direct production costs against the filmmakers income tax.
A no-fee incentive when filming at any state site. For independent
productions they offer no -interest loans of up to $7.5 million for qualifying
time.
COLORADO
Colorado hotels are allowed to offer rebates on the hotel sales tax beyond a 31-day
stay. This rebate is at the discretion of the hotel owner and can vary in
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
39
amount/percentage rebated. No other incentives are offered by the State of
Colorado.
FLORIDA
Florida offers two types of incentives for film production. A sales and use tax
exemption is provided for qualified film production expenses. This exemption is
taken at the point of sale for those produc tions that are registered and certified with
the Florida Film Commission prior to production taking place. In addition, Florida
offers a reimbursement of a percentage of qualified expenses for productions
companies, digital media effects entities, and relocation entities. Production
companies are eligible for reimbursement of 15% of total qualified expenses. This
reimbursement applies to a minimum of $850,000 in qualified expenses. The
maximum reimbursement ranges from $15,000 for Industrial or Education Films to
$2 million for movies. Digital effects media entities are eligible for a rebate of the
lesser of 5% of gross revenues or $100,000. Relocation entities are eligible for a
rebate of the lesser of 5% of gross revenues or $200,000.
ARIZONA
Arizona offers a 50% transaction privilege (sales) tax rebate to qualifying production
companies for motion picture/television/video, and commercial advertising
productions filmed in Arizona. The hotel occupancy tax is also waived if the stay is
over 30 days. In addition vehicles entering Arizona for the sole purpose of
production are exempt from the state fuel tax. Arizona also does not require the
withholding taxes of nonresident wages.
In discussions with the production companies and local film commission staff, very
few companies have taken advantage of Arizonas incentives due to the difficulty in
complying with the administrative rules established by the Arizona Department of
Revenue.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
40
Table 14 Film Production Incentives for Selected States
Incentives Texas Utah Nevada
New
Mexico Colorado Florida Arizona
Sales/use tax
exemption
100% off
(state &
local taxes)
10% to 12%
off n/a
100% off
(state tax
rate of 6%)
n/a
100% off
(qualified &
certified
expenses)
50% rebate
on sales tax
(if spending
is over $1m)
Hotel occupancy
tax
100% off
(if stay is
over 30
days)
n/a n/a n/a
Some rebate (if
stay is over 30
days)
n/a
100% off
(if stay is
over 30 days)
Fuel tax Full refund n/a n/a n/a n/a n/a
Exemption
for
production
vehicles
Income tax credit n/a n/a n/a
Credit equal
to 15% of
total
production
costs
n/a n/a n/a
Low-interest loans n/a n/a n/a
Available for
Ind.
productions
n/a n/a n/a
Other rebates /
exemptions n/a n/a n/a n/a n/a
5% to 15%
of qualified
production
expenses 1
No
withholding
tax of
nonresident
wages
Total production
spending in 2003 $165m $80m $100m $80m $30.4m n/a $42m
Notes
1 Florida offers a rebate of 15% of qualified expenses for production companies and 5% of expenses for either
digital media effects companies or relocation companies. The production company rebate requires minimum
expenses of $850,000 and limits the rebate to $15,000 to $2 million depending on the type of production.
The rebate for digital media effects companies is maxed at $100,000. The maximum rebate for relocation
companies is $200,000.
Source: ESI Corporation; Arizona Department of Commerce and Various Film Offices.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
41
FILM COMMISSION SERVICES
Film commissions offer a number of services aimed at reducing the time and money
producers spend on scouting and securing locations for productions. Most of the
services are found on each states website and are summarized below.
TEXAS FILM COMMISSION (WWW.GOVERNOR.STATE.TX.US/FILM)
Texas offers a large diversity of locations to meet the needs of producers. These
locations are displayed through an online location library of pictures found on the
Texas Film Commissions website. This website also includes information on
weather, state laws, links to regional film commissions, permanent set descriptions,
and a FAQs page. Texas has an online production manual that provides contacts for
local crews and production companies around the state.
UTAH FILM COMMISSION (WWW.FILM.UTAH.GOV)
Utah also offers an extensive location library online; many locations can be viewed
through their website. The crew base in Utah is heavily promoted and information
is provided through a resource guide that can link production companies to local
crews. The state film commission also provides an online application of the required
state permits.
NEVADA FILM COMMISSION (WWW.NEVADAFILM.COM)
The Nevada Film Commission website includes a location library and provides links
to local crews and production companies. Permit information and links to the
permit applications are also provided. Many vendors and businesses, ranging from
hotels to production-related businesses, are listed on the website. Interviews with
the Nevada Film Commission revealed that they attend trade shows and make sales
trips across the country to attract producers to their state.
NEW MEXICO FILM COMMISSION (WWW.EDD.STATE.NM.US/FILM)
New Mexico provides an online location library, weather and elevation facts, crew
and equipment links, and links to local film offices on the Commissions website.
They also provide samples, applications, and Internet links to state and city land
permits on their website.
COLORADO FILM COMMISSION (WWW.COLORADOFILM.ORG)
Colorado presents an online photo library online and production guide. The
production guide includes information on local crews, production, and postproduction
resources. The Colorado Film Commission website includes contact
information and procedures on how to obtain the various city, state, and federal land
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
42
permits that are required for filming in Colorado. Information on labor laws,
weather, roads, locations, and guilds and unions is also available.
FLORIDA FILM COMMISSION (WWW.FILMINFLORIDA.COM)
Florida offers a photo library and links to local production crews, local film
commissions, and permit applications. In helping to find locations for films, the
website contains a detailed location form to be filled out by producers. The Florida
Film Commission uses this form to match the producers requests to relevant
locations in Florida. Florida has an extensive discounts and deals section which
consists of production companies, hotels, and other businesses in Florida that offer
discounts on film-related business.
ARIZONA FILM COMMISSION (WWW.AZCOMMERCE.COM/FILM)
Arizona offers online permit information and applications for various permits
required to film in the State. The Arizona Department of Commerce Film Office
provides an online, searchable production guide. This production guide includes
contact names, phone numbers, and information on local technicians/crews,
equipment, and facilities. A breakdown of financial incentives is described on the
website. Links to current weather, as well as local film offices and festivals are
offered.
SU PPORT AND MARKETING
State and local film commissions generally employ a small number of people and use
varying marketing methods to promote locations within their state. Details about
each state film commission staff is listed below.
TEXAS
The Texas Film Commission employs eight people with an operating budget of
$500,000. Only a small percentage of the budget is used on marketing. The
Commission relies heavily on their website and does not participate in direct mail or
print media. The Texas Film Commission coordinates with local film offices during
their annual marketing trip to an event they host in Los Angeles. This event is
sponsored by the Texas Film Commission and targets producers, directors, and
studio executives. This event has proven to be a very effective strategy in promoting
Texas as a film location. The main challenge of the Texas Film Commission is the
lack of incentives to compete with other states which stems from the difficulty of
passing incentive legislation through their state government.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
43
UTAH
The Utah Film Commission employs six people and has a budget of $626,000.
Approximately $60,000 of the budget is spent on marketing per year. The Utah
Film Commission primarily relies on their website for most of its marketing. They
also attend trade shows and send out direct mail. The Utah Film Commission
coordinates with the local film offices to update the location library, host production
groups, and employ marketing at trade shows. Currently, the Film Commissions
main challenge is o btaining more incentive legislation to attract production.
NEVADA
The Nevada Film Commission has a staff of seven people and a budget of $800,000.
About $130,000 is set-aside for marketing. Their office finds trade shows to be an
effective marketing tool. The effectiveness of direct mail was questioned. The
website of the Nevada Film Commission is their main marketing tool and has
proven to be successful in offering information to producers. There are no local film
offices in the State of Nevada.
NEW MEXICO
The New Mexico Film Commission staff is comprised of eight employees. Since the
New Mexico Film Commission would not participate in a telephone interview,
information on budget and marketing is not available.
COLORADO
The Colorado Film Commissions staff was eliminated in 2003. The functions of the
Film Commission office were transferred to the Department of Tourism. In the past,
they have found a combination of direct mail, trade shows, and media advertising to
be a highly effective marketing strategy. Overall, their website is considered the
most important marketing tool. The Colorado Film Commission constantly
communicates with the local film offices and uses broadcast email to the local offices
to help locate potential film locations across the state.
FLORIDA
Staff of the Florida Film Commission was not available to participate in a telephone
interview or email questionnaire. As a result, information on the number of staff,
budget, and marketing is not available.
ARIZONA
The Arizona Department of Commerce Film Office employs two people and has a
budget of $291,100, of which 15% is spent on marketing. The size of the staff is
down from seven people during the year 2001.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
44
BEST PRACTICES SUMMARY
The film industry has a significant economic imp act on the states interviewed and /or
researched by ESI, including Texas, Utah, Nevada, New Mexico, Colorado, and
Florida. These states recognize that the film industry brings money from outside
the state and creates relatively high-paying jobs that support the film industry
which otherwise would not exist. These states have become aggressive in their
pursuit of film production because of the limited number of film productions in the
U.S. due to runaway production outside the country. Incentive programs,
production and scouting services (website, database of local crews, location pictures),
and promotion (trade shows, direct marketing) have been undertaken in order to
maintain and enhance the presence of the film industry in their state. New Mexico
is the most prominent example of the significant results that are possible with an
aggressive film industry campaign. Upon enacting a series of sales tax exemptions,
income tax credits, and no -interest loans effective in 2003, the economic impact of
the film industry in New Mexico went from $8 million in 2002 to $80 million in 2003.
With the right mix of incentives and marketing, there is no reason to believe that
the film industry could not have such a substantial impact in Arizona.
HOW DOES ARIZONA COMPARE
Arizona offers a few incentives for film production. A rebate is offered in the amount
of 50% of sales taxes paid on the purchase or lease of personal property to qualifying
production companies. This rebate is available for purchases over $1 million. All
hotel occupancy taxes are waived for stays over 30 days and vehicles entering
Arizona for the sole purpose of production are exempt from the state fuel tax. In
addition, withholding tax of nonresident wages is not required. Due to the
Department of Revenues administrative procedures, we are told that very few
companies take advantage of these incentives.
The current budget of the Arizona Department of Commerce Film Office is $291,100
with a staff of two. About 15% is spent on marketing and promotion. A summary
table highlighting the budget and staff size for each of the benchmarked states is
provided in Table 15.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
45
Table 15 Comparison of Budget and Staff Size for Selected States
State Total Budget Marketing Budget Size of Staff
Texas $500,000 Small percentage 8
Utah $626,000 $60,000 6
Nevada $800,000 $130,000 7
New Mexico1 n/a n/a 8
Colorado2 n/a n/a n/a
Florida3 n/a n/a n/a
Arizona $291,100 $43,650 2
Notes
1 The State of New Mexico Film Office refused to provide requested information.
2 The State of Colorado Film Office was eliminated in 2003.
3 The State of Florida Film Commission staff was not available to participate in a telephone interview.
Source: Arizona Department of Commerce and interviews conducted with the various Film Offices
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
46
V. ARIZONAS COMPETITIVE ADVANTAGES AND
DISADVANTAGES
Phone interviews were conducted with 23 out-of-state producers in eight segments of
the film industry during the month of June 2004. The segments of the film industry
include commercials, TV series, features, telefeatures, industrial, music videos,
documentaries, TV specials, and stills. A total of 95 producers were contacted (on
several occasions) resulting in 23 completed interviews. The producers were asked
questions regarding film production in Arizona as well as their perception and
experience in film offices practices, marketing, incentives, and the hiring of crews.
F I L M I N G I N ARIZONA
The producers were asked questions on production in Arizona, including when they
filmed, why Arizona was chosen, their likes and dislikes about filming in the state,
and how the Film Commissions services were used.
20 out of the 23 producers (87%) interviewed had previously filmed in Arizona.
Of the 3 that had not previously filmed in the state, two producers indicated their
plans to film in Arizona in the future.
The primarily reasons for filming in Arizona included the unique scenery,
consistent weather, and diversity of locations. Many productions have been
brought to Arizona because of the need for both a winter look (such as Flagstaff)
and a desert look. Arizona was also mentioned as a film-friendly environment in
that residents and local governments were very helpful.
All of the interviewed producers that had previously filmed in Arizona would
consider Arizona as a location for future productions.
When asked what they liked about filming in Arizona, most producers simply said
that it was an easy shoot. There was not a lot of red tape and the local
municipalities were helpful. The consistently sunny weather and reasonable
location fees also contributed to the ease of shooting.
Common dislikes of filming in Arizona included the lack of studios, crew, and
equipment. While many producers agree that Arizona has a strong talent base,
they have also noticed a large percent of the workforce moving to surrounding
states to work. Other problems include the difficulty in working with the Native
American tribes.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
47
Out of the 20 producers that filmed in Arizona before, 75% reported using the
services provided by the state or local film commissions, 10% used the Arizona
Department of Commerce Film Office but had encountered problems, and 15% did
not contact the Arizona Film Office at all. The Arizona Department of Commerce
Film Office services that were most used by the producers included scouting
locations through pictures and in-person, help and advice in dealing with the
different required filming permits around the state, and helping them to locate
additional crew and equipment. Of the two producers that had problems with the
film commission, the main problems were lack of communication and difficulty
with the website.
FILM COMMISSION SERVICES
The producers were asked to identify some of the most beneficial services that film
commissions can offer. These answers did necessarily to pertain specifically to the
Arizona Department of Commerce Film Office.
The most common service utilized by producers is online location pictures, which
can be downloaded or emailed to the producers and their clients. Another useful
film commission service is help with locating additional crew and equipment as
well as helping to facilitate the film permitting process. Producers also use the
state and local film commissions to coordinate with different organizations and
governments, especially in negotiations with state Native American tribes.
61% of producers mentioned location scouting and online pictures as a
tremendous asset from the film commissions. About 48% of respondents
mentioned help and advice with obtaining permits required to film on federal,
state, city and tribal land.
LOCATION FACTORS
Producers were asked which factors help them choose a location for a production.
87% of the respondents determine the location of the ir production based on the
location and scenery needs of the client or director.
22% said that money is a primary factor in the decision making process.
Other factors mentioned are how film-friendly a state is, lodging accessibility for
crew, and relations with union, guilds, and crews in the area.
RESEARCHING LOCATIONS
Producers were asked the means they use to obtain information on potential
locations. The producers were specifically asked how often they attended trade
shows, visited local and state websites, used brochures and other information pieces,
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
48
relied on word-of-mouth and previous experience, or contacted the local or state film
offices.
About 22% of the producers interviewed attended tradeshows at least some of the
time but usually only attended the Show Biz Expo in Los Angeles.
91% of the producers interviewed reported that the film commissions website is
the main tool used for obtaining information. The website was perceived to be the
quickest and easiest means of information gathering.
39% of the interviewed producers look at brochures and other printed materials.
18 of the 23 (78%) producers gather information through word-of-mouth.
17 out of 23 (74%) producers consider previous experiences filming in the state.
22 of the 23 producers contact the local or state film commissions by telephone or
mail to gather information on locations.
INCENTIVES
The producers were asked questions regarding if, to what extent, and what type of
incentives affect their choice for a production location. The findings of this survey
are summarized below.
35% of the producers interviewed revealed that financial incentives are a
consideration in choosing a production location. However, it appears that the
financial incentives are most meaningful when multiple locations are being
considered.
Only 8% of producers interviewed indicated that financial incentives were the top
priority in their choice of a production location.
Producers agreed that financial incentives only play a role in large budget
productions such as feature films and TV series.
The main financial incentives that would be attractive to production were sales
tax breaks and tax credit rebates. Other financial factors include filming permit
fee waivers, lodging and hotel discounts, and discounts from production vendors.
Non-financial incentives such as streamlining the permit process to save time
were mentioned.
LOCAL HIRING
Producers were asked about local hiring of production and post-production crew.
The results of these questions, focusing on the training and employment of local
crew, are summarized below.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
49
87% of producers interviewed do not use any local post-production services. Most
take their film back to Los Angeles or New York for post-production.
About 13% of the interviewed producers utilize some local post-production, such
as film processing.
87% of the interviewed producers use local crews and rent equipment locally.
Indeed, most hire about 50% of their crews locally, some hire as much as 90%
locally.
87% of producers interviewed view having previous experience related to the
position they are hiring for as the primary hiring consideration.
PERCEPTION OF ARIZONA
Producers were asked about their overall perception of filming in Arizona and what
they thought could be done to attract more production to the state.
All of the interviewed producers held a favorable view of Arizona as a potential
film location.
A common suggestion for improvement was making all information easy to
access. It was recommended that this could be solved by having an in-depth
website that covered all information producers could possibly require.
It was also recommended that the state build on its studio and crew foundation,
as this is a tremendous draw of production.
Nearly all producers mentioned promoting the unique scenery of Arizona more
aggressively to draw more attention.
COMPETITIVE ADVANTAGES/DISADVANTAGES SUMMARY
Arizona has both competitive advantages and disadvantages with respect to the film
industry compared to other states. Despite the competitive disadvantages noted
below, Arizona has a growing pool of industry leaders and , if properly tapped, this
new blood of leadership can help facilitate the growth of the film industry in
Arizona.
COMPETITIVE ADVANTAGES
Arizona has a number of competitive advantages with respect to film production.
The infrastructure to attract a robust film industry already exists in Arizona, and
includes a base of local talent, film technicians, available film production
equipment, and facilities (i.e. soundstages).
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
50
Most of the producers interviewed for this study indicated that Arizona is an easy
location to shoot a film. Compared to other states, Arizona is perceived to be less
bureaucratic when arranging a film production.
In addition, producers look favorably on Arizona due to labor environment and
cost. Since Arizona is a right-to-work state, producers do not have to deal with
local unions or guilds.
COMPETITIVE DISADVANTAGES
Arizona also has some competitive disadvantages with respect to film production.
These disadvantages could certainly be overcome.
Arizona has a perceived lack of available workforce, technicians/crews,
equipment, and facilities.
There is a lack of awareness among the film industry, in general, about Arizona
as a potential shooting location.
Compared to other states, Arizona lacks the financial resources, marketing, and
staffing to effectively compete for film productions taking place in the U.S. every
year.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
51
VI. FINDINGS AND RECOMMENDATIONS
SUMMARY OF FINDINGS
Since 2000, employment declined in Arizonas film industry by about 26.3% from
830 jobs in 2000 to 612 in 2003. By comparison, total employment in Arizona
increased by 1.4% during this same period. Indeed, most of the job losses
occurred in Metro Phoenix. Some 199 film industry jobs were lost in Metro
Phoenix between 2000 and 2003. The balance of the state also experienced loss of
jobs, as this area had 20 fewer jobs in 2003 than it did in 2000. Metro Tucson did
experience growth in film industry employment, but just slightly, as Metro
Tucson only gained 2 net jobs from 2000 to 2003.
In addition to the statewide loss of film industry jobs, average salaries in the film
industry declined statewide between 2000 and 2003. Average annual salaries for
film industry jobs in Arizona as a whole dropped by 24.3% to $35,773 in 2003.
Metro Phoenix and the balance of the state saw declines in average salaries.
From 2000 through 2003, average salaries for film industry jobs in these regions
decreased by 21.5% and 41.6%, respectively. Metro Tucson, on the other hand,
experienced an average salary increase of 7.6% from 2000 to 2003. The
discrepancy between job losses in Metro Phoenix and the balance of the state and
job gains in Metro Tucson can possibly be attributed to the qualifications of
certain segments of workers. With the increased reliance on the highly technical
post-production process, the demand for these workers has increased. And with a
large percentage of the highly technical workers located in Metro Tucson and
Metro Phoenix, it stands to reason that the change in their employment trends
has an influence on the overall trends in Film Industry employment, and why
the statewide differences in employment trends exist.
In 2003, the film industry generated over $201 million in economic activity and
nearly $57 million in wages in Arizona.
Film festivals held in Arizona also contribute to the Arizona economy. In 2003,
the three operating film festivals brought in approximately $240,000 in revenue
and spent about $170,000 in the Arizona economy. Total attendance at these film
festivals was estimated at 19,800 for 213 films. These festivals reported a total of
eight full time jobs and 230 volunteers.
Runaway production, where films to be shown in the U.S. are produced outside of
the U.S., is a national phenomenon. Runaway production occurs because non-
U.S. locations, such as Canada and New Zealand, are less expensive than U.S.
locations. As more film productions are lured outside the U.S., the number of film
productions taking place in the U.S. is dwindling. As a result, there is intense
competition among the states trying to bring film productions to their state.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
52
In order to lure film productions, states have undertaken aggressive advertising,
incentive, and marketing campaigns. These efforts have resulted in revamped
websites which include photos of locations, information on permits and
regulations, and directories of local technicians/crew just to name a few.
Financial incentives are also being offered. These incentives include sales tax
exemptions, income tax credits, and low-interest loans for film production
activities. In addition, certain states have helped develop the local film
technician and crew jobs as well as those companies that provide equipment to
film productions. Nationwide marketing and previous filming experience has
proven to be an effective means to increase word of mouth which appears to be
one of the primary factors that producers rely on when considering a location.
The states analyzed in this report consider the film industry as a major
contributor to their economies because film production tends to bring money into
the state from out-of-state sources. In Colorado, for example, about 75% of
production company receipts came from out-of-state sources during 2001. By
comparison, based on surveys conducted by ESI, only 21% of Arizona production
company receipts came from out-of-state sources. As the number of film
productions taking place in Arizona has dwindled in recent years, Arizona
production and supplier companies have been forced to go where the work is.
Currently, a majority of work within close proximity to Arizona is located in New
Mexico.
New Mexico is one of the more recent examples of the dramatic impact the film
industry can have on an economy given a certain mix of incentives, advertising,
and accessibility of information. Near the end of 2002, New Mexico enacted
legislation calling for sales tax exemptions, income tax credits, and no -interest
loans on film productions taking place in New Mexico. The result was a ten-fold
increase in economic activity in the state. In 2002, the film industry spent about
$8 million in New Mexico. During 2003, the first year the incentives took place,
film production picked up dramatically and spending reached approximately $80
million. Indeed, if film production spending in New Mexico can go from $8 million
to $80 million in one year, there is no reason to believe this could not happen in
Arizona.
The main concern of Arizonas resident film industry is the apparent lack of

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Analysis of the Film and Video
Industry in Arizona
December 2004
Prepared by
ESI Corporation
300 W. Clarendon
Suite 470
Phoenix, AZ 85013
www.esicorp.net
Analysis of the Film and Video
Industry in Arizona
December 2004
Prepared by
ESI Corporation
300 W. Clarendon
Suite 470
Phoenix, Arizona 85013
(602) 265-6120
www.esicorp.net
Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:
Dan Anderson
Assistant Executive Director for
Institutional Analysis
Arizona Board of Regents
Brian Cary
Principal Economist
Arizona Joint Legislative Budget
Committee
Lisa Danka
Director, Commerce & Economic
Development Commission
Arizona Department of Commerce
Kent Ennis
Economic Consultant
CH2M Hill
Wayne Fox
Director, Bureau of Business and
Economic Research
Northern Arizona University
James B. Nelson
Economic Development Manager
Salt River Project
William P. Patton, Ph.D.
Director of Economic Development
Tucson Electric Power
Elliott D. Pollack
Elliott D. Pollack & Co.
Brad Steen
Chief Economist
Arizona Department of
Transportation
Marshall Vest
Director, Economic and Business
Research
Eller College of Management
University of Arizona
Don Wehbey
Economist
Research Administration
Arizona Department of Economic
Security
Jim Wontor
Advisor, APS Forecasting
Arizona Public Service
2004 by the Arizona Department of Commerce. This document may be reproduced without restriction provided it is reproduced
accurately, is not used in a misleading context, and the author and the Arizona Department of Commerce are given appropriate
recognition.
This report was prepared for the Arizona Department of Commerce with funding from the Commerce and Economic Development
Commission. Elements of this report may be presented independently elsewhere at the author's discretion. This report will be
available on the Internet for an indefinite length of time at http://www.azcommerce.com. Inquiries should be directed to the Office of
Economic Information and Research, Arizona Department of Commerce, (602) 771-1161.
The Arizona Department of Commerce has made every reasonable effort to assure the accuracy of the information contained herein,
including peer and/or technical review. However, the contents and sources upon which it is based are subject to changes, omissions and
errors and the Arizona Department of Commerce accept no responsibility or liability for inaccuracies that may be present. THIS DOCUMENT
IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THE ARIZONA DEPARTMENT OF COMMERCE PRESENTS THE MATERIAL IN THIS
REPORT WITHOUT IT OR ANY OF ITS EMPLOYEES MAKING ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, OR ASSUMING ANY LEGAL LIABILITY OR RESPONSIBILITY FOR THE
ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, APPARATUS, PRODUCT, OR PROCESS DISCLOSED, OR
REPRESENTING THAT ITS USE WOULD NOT INFRINGE PRIVATELY OWNED RIGHTS. THE USER ASSUMES THE ENTIRE RISK AS TO THE
ACCURACY AND THE USE OF THIS DOCUMENT AND ANY RELATED OR LINKED DOCUMENTS.
Analysis of the Film and Video
Industry in Arizona
PREPARED BY:
ESI CORPORATION
300 West Clarendon Avenue
Suite 470
Phoenix, Arizona 85013
(602) 265-6120
www.esicorp.net
December 2004
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
i
EXECUTIVE SUMMARY................................................................................................1
Background ...........................................................................................................1
Economic Impact Findings..................................................................................1
Other Key Findings ..............................................................................................3
Recommendations ...............................................................................................4
I. INTRODUCTION...........................................................................................................8
Purpose of This Report .......................................................................................8
Study Process and Methodology .......................................................................8
Industry Trends ...................................................................................................11
II. ECONOMIC ANALYSIS OF THE FILM & VIDEO INDUSTRY IN ARIZONA.15
Employment and Wage Trends .......................................................................15
Economic Impact of the Film Industry.............................................................19
III. STRUCTURE OF THE FILM INDUSTRY IN ARIZONA...................................24
Film Festivals ......................................................................................................24
High Schools .......................................................................................................25
Community Colleges/Universities ....................................................................26
Production Companies ......................................................................................27
In-House Production ..........................................................................................29
Local Film Commissions ...................................................................................29
Film Industry Suppliers ......................................................................................31
Survey Findings Summary................................................................................33
IV. BEST PRACTICES/BENCHMARKS...................................................................34
Economic Vitality................................................................................................34
Film Commission Services ...............................................................................41
Support and Marketing ......................................................................................42
Best Practices Summary...................................................................................44
V. ARIZONAS COMPETITIVE ADVANTAGES AND DISADVANTAGES........46
Filming in Arizona ...............................................................................................46
Film Commission Services ...............................................................................47
Location Factors .................................................................................................47
Researching Locations ......................................................................................47
Incentives.............................................................................................................48
Local Hiring .........................................................................................................48
Perception of Arizona ........................................................................................49
Competitive Advantages/Disadvantages Summary.....................................49
Table of Contents
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
ii
VI. FINDINGS AND RECOMMENDATIONS.............................................................51
Summary of Findings .........................................................................................51
Recommendations .............................................................................................53
APPENDIX A ECONOMIC IMPACT MODEL ...................................................A-1
APPENDIX B SURVEY INSTRUMENTS...........................................................B-1
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
iii
Table 1 Definition of the Film Industry.......................................................................1
Table 2 Economic Impact of the Film Industry on the Arizona Economy -
2003 ................................................................................................................2
Table 3 Definition of the Film Industry.......................................................................8
Table 4 Survey Response Summary.......................................................................10
Table 5 Definition of the Film Industry.....................................................................15
Table 6 2003 Average Annual Salaries for the Film Industry in Arizona ...........17
Table 7 Film Industry Employment Distribution in Arizona - 2003 ......................17
Table 8 Average Annual Salaries in 2003 Film Industry in Metro Phoenix,
Metro Tucson & Balance of the State .....................................................19
Table 9 Economic Impact of the Film Industry on the Arizona Economy -
2003 ..............................................................................................................20
Table 10 Total Economic Impact of the Film Industry on the Arizona
Economy by NAICS 2003.......................................................................20
Table 11 Total Economic Impact of the Film Industry on the Arizona
Economy by Region - 2003 .......................................................................21
Table 12 Impact of Arizona Film Festivals in 2003................................................22
Table 13 Top Issues by Type of Survey Respondent...........................................33
Table 14 Film Production Incentives for Selected States.....................................40
Table 15 Comparison of Budget and Staff Size for Selected States ..................45
Figure 1 Average Employment and Establishments ............................................16
Figure 2 Arizona Film Industry Employment Distribution 2000 through 200318
Figure 3 Arizona Film Festivals Total Revenues and Expenses in 2003 .......25
Figure 4 Percentage of Respondents Who Own Various Types of Equipment 26
Figure 5 Sources of Recruiting that Producers Utilize ..........................................28
Figure 6 In-House Film/Video Production in 2003.................................................30
Figure 7 Percentage of Local Film Commissions by Types of Funding .............31
Figure 8 Percentage of Respondents Who Supplied the Following Segments
of the Film Industry .....................................................................................32
Figure 9 Arizona Department of Commerce Film Office Budget........................37
List of Figures
List of Tables
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
1
EXECUTIVE SUMMARY
BACKGROUND
Arizona has a rich history in the film industry dating back to the early westerns,
and has been the location for feature films, television series and commercials. In
recent years, the amount of filming in the U.S., in general, and Arizona, in
particular, has declined as production companies moved to lower cost locations, such
as Canada and Mexico. The Film Industry in Arizona is important to the economy
in that it brings in dollars from other states and countries to be spent here on
payroll and film production services. It also has a firm basis in technology and
innovation / entrepreneurship, and has both urban and rural components. While
these are generally understood benefits of the industry, the Arizona Department of
Commerce Film Office seeks a study that will define the film and video industry as a
cluster, quantify the impacts of the industry, and analyze the industry in terms of
state support programs (such as workforce development and education).
ECONOMIC IMPACT F INDINGS
The economic analysis of the film industry begins with the development of a
definition of the film industry by the North America Industrial Classification System
(NAICS) Codes, which were reviewed and approved by the client. Based on analysis
of NAICS industries, the Film Industry is defined as the group of three industries
shown in Table 1.
Table 1 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
The Film Industry had a significant economic impact on Arizona in 2003. With total
wages of approximately $21.9 million, the Film Industry, in and of itself, generated
over $107 million in direct economic activity (or output) throughout the State of
Arizona. In addition to the 612 film industry jobs, the Film Industry is responsible
for the maintenance of an additional 1,092 indirect and induced jobs in Arizona.
These jobs include those occupations that supply goods and services to companies in
the Film Industry as well as jobs supported by the spending of the wages from the
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
2
direct and indirect jobs. This means that for every 100 Film Industry jobs in
Arizona, another 182 jobs exist to service and support the Film Industry. Overall,
approximately 1,704 total direct and indirect jobs in Arizona were supported by the
Film Industry during 2003. These jobs generated about $56.6 million in total wages
and $201.5 million in total economic activity (see Table 2 below).
Table 2 Economic Impact of the Film Industry
on the Arizona Economy - 2003
Type Jobs Total Wages Output
Direct 612 $21,885,900 $107,345,900
Indirect 665 $20,856,400 $59,407,300
Induced 427 $13,856,600 $34,698,300
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
Film festivals held in Arizona also contribute to the Arizona economy. In 2003, the
three operating film festivals brought in $240,000 in revenue and had $220,000 in
expenditures of which $170,000 was spent in Arizona. The average length of each
film festival was three days with total attendance at these film festivals estimated at
19,800 people for 213 films.
The Arizona Department of Commerce tracks the value of film production
expenditures in the state generated from out of state production companies. The
last full year in which data is available is fiscal year 2003, during which there were
a total of 427 completed projects translating into an estimated economic impact of
$41.6 million being spent on wages to local crews as well as the procurement of local
goods and services. While there is no way of knowing precisely how much of the
Arizona film industry total impact (Table 2) can be attributed to out of state
production, the survey results do reveal anywhere from 10.9% to 25.7% of revenues
were derived from out of state sources.
It is evident that out of state production is important to the local economy and it
helps stimulate the growth of the local film industry. Both are needed to help
sustain one another. Fostering the growth of Arizonas film industry will require a
two pronged approach; one that focuses on strategies for strengthening the local film
industry and the other promoting Arizona to out of state production companies.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
3
OTHER KEY F INDINGS
Since 2000, employment declined in Arizonas film industry by about 26.3% from
830 jobs in 2000 to 612 in 2003. By comparison, total employment in Arizona
increased by 1.4% during this same period. Indeed, most of the job losses
occurred in Metro Phoenix. Some 199 film industry jobs were lost in Metro
Phoenix between 2000 and 2003. The balance of the state also experienced loss of
jobs, as this area had 20 fewer jobs in 2003 than it did in 2000. Metro Tucson did
experience growth in film industry employment, but just slightly, as Metro
Tucson only gained 2 net jobs from 2000 to 2003.
In addition to the statewide loss of film industry jobs, average salaries in the film
industry declined statewide between 2000 and 2003. Average annual salaries for
film industry jobs in Arizona as a whole dropped by 24.3% to $35,773 in 2003.
Metro Phoenix and the balance of the state saw declines in average salaries.
From 2000 through 2003, average salaries for film industry jobs in these regions
decreased by 21.5% and 41.6%, respectively. Metro Tucson, on the other hand,
experienced an average salary increase of 7.6% from 2000 to 2003. The
discrepancy between job losses in Metro Phoenix and the balance of the state and
job gains in Metro Tucson can possibly be attributed to the qualifications of
certain segments of workers. With the increased reliance on the highly technical
post-production process, the demand for these workers has increased. And with a
large percentage of the highly technical workers located in Metro Tucson and
Metro Phoenix, it stands to reason that the change in their employment trends
has an influence on the overall trends in Film Industry employment, and why
the statewide differences in employment trends exist.
Runaway production, where films to be shown in the U.S. are produced outside of
the U.S., is a national phenomenon. Runaway production occurs because non-
U.S. locations, such as Canada and New Zealand, are less expensive than U.S.
locations. As more film productions are lured outside the U.S., the number of film
productions taking place in the U.S. is dwindling. As a result, there is intense
competition among the states trying to bring film productions to their state.
In order to lure film productions, states have undertaken aggressive advertising,
incentive, and marketing campaigns. These efforts have resulted in revamped
websites which include photos of locations, information on permits and
regulations, and directories of local technicians/crew just to name a few.
Financial incentives are also being offered. These incentives include sales tax
exemptions, income tax credits, and low-interest loans for film production
activities. In addition, certain states have helped develop the local film
technician and crew jobs as well as those companies that provide equipment to
film productions. Nationwide marketing and previous filming experience has
proven to be an effective means to increase word of mouth which appears to be
one of the primary factors that producers rely on when considering a location.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
4
The states analyzed in this report consider the film industry as a major
contributor to their economies because film production tends to bring money into
the state from out-of-state sources. In Colorado, for example, about 75% of
production company receipts came from out-of-state sources during 2001. By
comparison, based on surveys conducted by ESI, only 21% of Arizona production
company receipts came from out-of-state sources. As the number of film
productions taking place in Arizona has dwindled in recent years, Arizona
production and supplier companies have been forced to go where the work is.
Currently, a majority of work within close proximity to Arizona is located in New
Mexico.
New Mexico is one of the more recent examples of the dramatic impact the film
industry can have on an economy given a certain mix of incentives, advertising,
and accessibility of information. Near the end of 2002, New Mexico enacted
legislation calling for sales tax exemptions, income tax credits, and no -interest
loans on film productions taking place in New Mexico. The result was a ten-fold
increase in economic activity in the state. In 2002, the film industry spent about
$8 million in New Mexico. During 2003, the first year the incentives took place,
film production picked up dramatically and spending reached approximately $80
million. Indeed, if film production spending in New Mexico can go from $8 million
to $80 million in one year, there is no reason to believe this could not happen in
Arizona.
The main concern of Arizonas resident film industry is the apparent lack of
production business that is brought to Arizona. The most frequently stated
reasons for the lack of production business in Arizona include lack of resources to
thoroughly support and promote the state, lack of incentives, and lack of facilities
and professional technicians. It was indicated that the stigma with Arizona is
that the industry as a whole thinks there are not enough skilled crew in Arizona
to support the needs of out-of-state productions. Compounding this problem is
the lack of production projects in the state which has led to an exodus of talented
professionals who have followed the business elsewhere.
RECOMMENDATIONS
The Arizona Film and Video Industry is at a crossroads. Fierce competition from
abroad and technological advances in filmmaking have had an adverse impact on
employment in the state. A number of initiatives need to occur in order for Arizona
to regain its competitiveness, promote technology and innovation; encourage local
and independent filmmaking; and attract more out-of-state film productions that
enhance local economies and create jobs statewide.
In spite of the fact that jobs in this industry have declined over the last several
years, Arizona has a solid foundation to build upon, which includes its rich history in
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
5
filmmaking, the current base of film technicians/crews, equipment, and facilities, as
well as diversity of filming locations and weather.
The reality of the film industry in the U.S. is that states are competing for a limited
number of film productions as more and more production takes place outside the
U.S. As a result, recognizing the significant impact of film production on their
economies, states have enacted aggressive marketing campaigns to maintain and
enhance the film industry. Indeed, if film production spending in New Mexico can
go from $8 million to $80 million within one year, there is reason to believe that the
film industry could also have such an impact on Arizona.
Fostering the growth of the film and video industry in Arizona will require a
collaborative effort that includes support from private business, government as well
as education. With that in mind, the following recommendations include ways
Arizona can emulate or even improve on best practices in other states, approaches
for promoting local filmmaking, and address identified deficiencies through a team
effort.
ESTABLISH COLLABORATIVE PARTNERSHIPS
Work to unite the disparate pieces of the film industry in the state by soliciting
their involvement in the development and implementation of a Film in Arizona
marketing campaign.
Encourage education and private business to work together to establish
mentoring, internship and apprenticeship opportunities.
Facilitate a seamless integration of service delivery by identifying the weaknesses
in the film making supply chain and work to overcome those weaknesses.
FACILITATE AND PROMOTE LOCAL FILMMAKING
Stimulate the creation of local filmmaking by working with the local film festivals
and have an annual statewide competition which would culminate at an annual
film festival with prizes presented by the Governor.
Support local nonprofit organizations that promote the development of local
filmmaking, such as the newly located Blacktop Films. This support could
include helping to publicize the non-profit service to providing financial
assistance.
Develop an outreach program aimed at the Arizona film industry which would
promote the small business assistance programs offered by the Arizona
Department of Commerce.
Create a revolving loan fund in conjunction with lending institutions that
independent filmmakers could access to help with production and distribution
costs of their films.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
6
Ensure the availability of future workers by encouraging the expansion of
educational offerings at the high school and community college levels.
Help Arizonas film industry stay competitive by promoting the availability of
workforce development dollars to the industry.
Inaugurate an annual filmmaking camp to foster interest among the states
youth. This could be done through a collaboration of the Arizona film industry
and the colleges.
ESTABLISH INCENTIVES WITH A RETURN ON INVESTMENT
Create an incentive program to attract out of state production companies that
provides a tax rebate for utilizing Arizona talent, technicians/crews, and
equipment.
Ensure that incentives are understandable and easily obtainable. The types,
amount, eligibility, and qualifications of incentives offered should be clearly
documented on the Commerces website. There should be as little administration
as necessary in order to apply for incentives. Incentives are effectively useless if
production companies perceive there to be too much red tape to be worth the
effort.
Support incentives that are geared toward smaller, resident independent film and
video productions, such as loaning out equipment.
MARKETING AND PROMOTION
Based on the surveys conducted for this study, Arizona does not appear to be on the
radar screen of most film production companies compared to other states. A more
targeted, effective marketing strategy is needed to promote Arizonas diversity of
locations, professional technicians/crews, and film festivals.
Develop a branding and marketing plan to promote film production in Arizona.
Implementation strategies should be stratified to target the various types of
filming activity (feature films, commercials, television and cable, etc).
Increase the amount of resources and marketing dollars to effectively compete for
film business.
Attend national and regional trade shows and work to establish personal
relationships with production companies by scheduling regular sales calls.
Advertise in national magazines that target the film production industry, such as
Hollywood Reporter and Daily Variety.
Promote Arizona as having more than just desert locations. Highlight places such
as Flagstaff and Sedona for forested locations and Scottsdale and Tucson for
urban landscapes.
Help the film festivals secure big name signature sponsors, an example is Ralph
Laurens 20 year sponsorship of the annual Telluride Labor Day Film Festival.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
7
Promote local film festivals in national publications to draw larger audiences
nationally and internationally.
Provide more resources and staffing to increase the level of customer service.
New Mexico was identified a number of times for their apparent willingness to
help in any way they can to bring a production to their state. This higher level of
customer service requires substantially more resources and staffing than
currently available at the Arizona Department of Commerce Film Office.
Develop a standardized tracking system for the State and Local Film offices to use
annually in monitoring the value of out-of-state production. Information to be
gathered should include revenue by project type (commercials, documentaries,
films, television, videos, post-production), the number of projects, and the number
of production days.
FILM OFFICE WEBSITE
Interviews with producers revealed that the website for a states film office is one of
the starting points in scouting locations for film productions. An organized, welldesigned
website with a wealth of information is one of the most effective means at
marketing Arizona as a film destination. Following are suggestions for
improvement to the current Arizona Department of Commerce website.
Create a website link that is easy-to-use with all information available within two
or three clicks. An unorganized, confusing website is a deterrent to most users.
Include nearly all the location resources a production company could ever need to
know about filming in Arizona such as the following:
=>Online picture gallery of locations in Arizona
=>All pictures should be downloadable
=>Streaming video with state footage
=>Clear description of permits for filming in Arizona
=>Online permit applications including filing instructions
Provide an online, searchable directory of up-to-date production resources
including contact information for technicians/crews, equipment suppliers, studios,
and trucking, etc.
Supply an online directory of hotels, restaurants, entertainment venues, and any
other attraction a potential production would desire while filming in Arizona.
Include a clear discussion of the incentives available in Arizona to out of state
production companies
Create a website with an identifiable, easy-to-remember name. For example,
Nevadas website is at www.NevadaFilm.com and Floridas website is at
www.FilminFlorida.com.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
8
I. INTRODUCTION
PURPOSE OF THIS REPORT
The purpose of this report is to determine the impact the Film Industry has on
Arizonas economy. In addition to quantifying the Film Industrys economic impact
on the Arizona economy, this report will assess Arizonas competitive advantages
and disadvantages with respect to the desirability of filming in Arizona. Industry
research, telephone interviews, and web-based surveys were conducted to help make
recommendations for enhancing Arizona as a film destination.
STUDY PROCESS AND METHODOLOGY
The study process undertaken was multi-faceted and incorporated original research
through the use of surveys and telephone interviews as well as a quantitative
analysis determining the economic impact of the film industry on the States
economy. To accomplish this, a number of methodologies were used to measure the
impact of the Film Industry on Arizonas economy and assess the States competitive
advantages and disadvantages.
The methodology for each section of this report is summarized on the following
pages.
CHAPTER II : ECONOMIC ANALYSIS OF THE FILM INDUSTRY
The economic analysis of the film industry begins with the development of a
definition of the film industry by NAICS Codes, which were reviewed and approved
by the client. Based on analysis of NAICS industries, the Film Industry is defined
as the group of three industries shown in Table 3.
Table 3 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
Covered Employment and Wages data (formerly ES202) obtained from the Arizona
Department of Economic Security was used to perform a quantitative analysis of the
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
9
industry in terms of total number of establishments, employment, and wages from
2000 through 2003 (the latest data available).
For the most current year available (2003), direct employment data was used to
calculate the economic impact of the film industry in Arizona. Direct employment
data from the industry was analyzed through the IMPLANPro economic impact
model to document indirect and induced multiplier effects of the industry to the
State. Refer to Appendix A for further detail.
CHAPTER III: STRUCTURE OF THE FILM INDUSTRY IN ARIZONA
A variety of survey instruments were used to gather information from a number of
groups with ties to the film industry. These groups included production companies,
film industry suppliers, in-house production, and film commissions. Other groups
include universities and colleges, school districts, and film festivals.
This set of survey analyses document the structure of the film industry, and
additionally was used as one method of collecting insights from knowledgeable
individuals concerning the states competitive advantages and disadvantages.
The Arizona Department of Commerce identified an appropriate universe (group of
people to be surveyed) for each survey and provided contact information.
The surveys were web-based, and featured automatic tabulation and reporting of
defined answers (i.e. specific responses to fill in the blank questions are not used to
tabulate by, but are recorded in the dataset). The surveys were conducted between
May 6, 2004 and June 8, 2004. A total of 113 surveys across all film industry groups
were completed resulting in an overall response rate of 16.9% (see Table 4). Based
on this firms experience in conducting surveys and the overall response rate
achieved in these surveys, the results from these surveys reasonably represent the
trends and opinions of all entities included in the sampled population.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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Table 4 Survey Response Summary
Film Industry Group
Survey
Size Respondents
Response
Rate
Production Companies 346 53 15.3%
Film Industry Suppliers 240 32 13.3%
In-House Production 16 8 50.0%
Film Commissions 17 7 41.2%
Universities and Colleges 17 3 17.6%
School Districts 30 7 23.3%
Film Festivals 4 3 75.0%
Total 670 113 16.9%
Source: ESI Corporation
CHAPTER IV: FILM COMMISSION BEST PRACTICES FROM OTHER STATES
In conjunction with the Arizona Department of Commerce, six other states were
identified in order to obtain best practice information. These six states are regarded
by the profession as having the best film programs and have been extremely
successful in attracting production to their state. Phone interviews were conducted
with the film and economic development departments of these states to learn about
their program activities, size of staff and funding levels, incentive programs,
successes and the like.
CHAPTER V: ARIZONAS COMPETITIVE ADVANTAGES AND DISADVANTAGES
The competitive advantages and disadvantages of Arizona were addressed through
interviews with knowledgeable individuals both locally and out of state. The key
factors and how Arizona is rated differs for feature films as compared to
commercials, for example.
In consultation with the Arizona Department of Commerce, various sub-industries
were identified. The key sub-industries included commercials, industrials/corporate
films, documentaries, and feature films. Other sub-industries include sports
programming, television and cable, and music video.
CHAPTER VI: CONCLUSIONS AND RECOMMENDATIONS
A set of recommendations has been made based on the research performed in the
previously noted sections. These recommendations include ways to emulate or even
improve on best practices in other states, approaches for addressing identified
deficiencies, and methods for tracking success.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
11
INDUSTRY TRENDS
FILM INDUSTRY OVERVIEW
The film industry in the United States generates over $20 billion in direct economic
activity each year, according to a 1999 study from the Monitor Company. This study
(The Monitor Report) was commissioned by the Directors Guild of America and the
Screen Actors Guild of America to quantify the economic effects of runaway
production on the U.S. The film industry includes production and distribution of
films, television (series and TV movies), and commercials. Between 1990 and 1998,
the U.S. film industry experienced rapid growth. According to the Monitor Report,
the number of productions (film, TV, and commercials) developed in the U.S.
increased by about 50% from 716 productions in 1990 to 1,075 in 1998. Feature
films comprise a significant portion of these productions and overall expenditures.
Feature film productions in the U.S. spent an estimated $11 billion in 1998 (the
latest data available). These expenditures include payroll, rent, and supplies just to
name a few. These supplies can range from hotel rentals, car rentals, and catering
to freeway tolls, construction materials, and wardrobe. The ripple effect of this
spending is significant. According to the Monitor Report, the $11 billion in direct
spending on feature film production in the U.S. had an estimated ripple effect of $16
billion in 1998. This additional economic impact includes the overall economic
output of those businesses supplying goods and services to feature film production
and the spending of the wages of the workers in the film industry and the suppliers.
Including the estimated ripple effects, feature film production contributed an
estimated $27.7 billion to the U.S. economy in 1998. Additional economic activity is
generated from television and commercial production. Estimates of the economic
impact of these types of productions were unavailable.
The latest data available from the U.S. Bureau of Labor Statistics indicates that in
2003 there were nearly 365,000 jobs directly involved in the U.S. film industry,
which is slightly down from 2002. There are two types of jobs in the film industry:
above-the-line workers and below-the-line workers. Above -the-line staff generally
includes the directors, writers, producers, and primary actors. These are the major
players in a production. Below-the-line workers include non-primary actors,
technicians, assistant directors, artists, specialists, unit production managers, and
set movers, just to name a few. These jobs are behind the scene s of the productions.
According to industry experts, approximately 70% to 80% of these below-the-line
workers are hired locally where the production takes place. These workers typically
do not follow the production when it changes location. In addition, these below-theline
jobs are relatively high paying. According to the U.S. Bureau of Labor
Statistics, the average hourly wage for these types of jobs was $20.75. By
comparison, the average hourly wage was $13.44/hour for a typical private sector job
in the U.S.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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RUNAWAY PRODUCTION
There are several factors that producers consider in choosing a location for a
potential production. Over the past 30 years, production within the U.S. has
concentrated in California, New York, Florida, North Carolina, Texas, and Illinois.
Producers have generally favored these states because producers like to work where
they live, and most live in the U.S. production clusters. These states are considered
production clusters because they contain all the resources needed as well as
financing, development, and distribution assets. According to the latest data from
the U.S. Department of Commerce, these states account for 88% of the motion
picture industrys revenue. They also supply 80% of the total employment and 65%
of the total number of establishments in the industry. These states are typically
favored because they fit the location needs of the particular production. Other states
have attracted film production by promoting scenery and location attributes in their
states that are not generally considered by most producers. In addition to these
location attributes, the overall cost of producing in these locations, relative to the
expected revenues from the project, is of primary importance. Producers are always
searching for low cost locations. Over the past decade, U.S. productions have moved
outside the U.S. into countries such as Canada, Australia, and New Zealand. This
phenomenon is called runaway production.
Runaway production occurs when a film that is released and developed in the U.S. is
filmed in a foreign country. Most of the runaway productions occur due to cost
factors. Locations in Canada, Australia, and New Zealand, for example, are sought
after due to the fact that the cost of production is lower than that in the U.S. The
frequency of this type of runaway production increased rapidly between 1990 and
1998. In 1990, about 100 films were produced outside the U.S., according to the
Monitor Report. In 1998, the latest data available, the number of films produced
outside the U.S. increased by approximately 185% to 285 films. If it were not for
lower costs of production and other factors in those countries, these films would have
been produced in the U.S. The foregone economic activity related to these
productions is the result of the migration of film productions outside the U.S.
According to the Monitor Report, the 285 films that were produced outside the U.S.
in 1998 had an overall estimated economic impact of $10.3 billion. This foregone
economic impact (or output) includes $2.8 billion in direct spending and the ripple
effects of that direct spending totaled about $5.6 billion.
INCENTIVES FOR RUNAWAY PRODUCTIONS
According to film industry experts, Canada, Australia, and New Zealand are the
most popular countries for runaway production. These countries have adopted
production plans that draw U.S. producers typically through the use of incentives.
These incentives range from tax breaks on production spending to fee and permit
waivers. When the effects of exchange rates, lower production costs, and incentives
are considered, total production costs for a typical film production are about 25%
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
13
lower than if the production were to take place in the U.S. A study conducted by the
Directors Guild of America and the Screen Actors Guild indicated that Canadian,
Australian, and U.K. currencies have all declined by 15% to 23% since 1990 relative
to the U.S. dollar. When you factor in the already low wage rates in Canada and
Australia the overall savings becomes very significant.
According to the Monitor Report, Canada adopted a successful strategy in drawing
U.S. producers to move their productions to Canada. Canada took an integrated
approach toward luring U.S. film productions. As Canada used a series of incentive
programs to attract producers, they included qualifying requirements to promote
local hiring. This requirement for local hiring helped give local crews in Canada the
necessary experience in film production that they otherwise would not have
received. These incentive programs and local hiring qualifications also resulted in
the development of the local physical infrastructure needed to support future film
productions. Now that Canadian crews have the necessary experience in film
production and the physical infrastructure is developed, there is no difference
between the quality of filmmaking in Canada versus the U.S.
Canadas incentive programs include federal and provincial tax credits of 22% to
46% of labor expenses, which yield up to a 10% decrease in total expenses. U.S. film
productions taking place in Canada nearly tripled between 1990 and 1998 (the latest
data available). In 1990, about 63 productions took place in Canada. By 1998, about
232 productions took place in Canada. Indeed, Canada captures an estimated 81%
of the total number of U.S. runaways. Other countries, such as Australia, which
capture about 10% of U.S. film production, have begun to copy this strategy to gain
more of the U.S. production market.
TECHNOLOGICAL ADVANCES
Recent advances in technology have created remarkable changes in the processes of
film production. Contemporary filmmakers are now able to take advantage of new
technology to reduce costs, increase productivity among their staff, and better choose
production locations. Many filmmakers use new post-production advances to be able
to scan film onto a videotape format and store the data on computers. This creates a
box environment where producers and specialists can collaborate on different
aspects of post-production over long distances. This has decreased the dependence
on large, local post-production facilities. In addition, producers can use postproduction
service providers from around the world as opposed to only locally.
Virtual environments and sound stages have also decreased the dependence on
location for film producers. They are able to reduce production costs by filming
scenes in front of green screens or using computers to digitally modify the
surrounding area. The latest advancement is in digital filmmaking, which enables
filmmakers to instantly review their footage, cutting down on production time and
cost. The digital medium requires a new type of workforce that consists of
individuals with technical backgrounds.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
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In this technologically advanced environment, skilled workers and a technical
infrastructure are necessary for a viable production market to exist. Locations that
have these resources are attractive to producers who are filling their crew locally.
These resources commonly develop into production clusters, which contain all of the
resources required. These resources include access to financing, development, and
distribution resources. Production clusters are an advantage to producers and
typically result in lower overall costs of production.
SHIFT IN TELEVISION PROGRAMMING
A noticeable trend in recent years has been a shift in programming from movie of
the week to reality based television shows. One reason for the movement toward
reality-based programming is due to changes in the audience. People are
demanding more unpredictability in their television shows as opposed to the
conventional linear programming, and reality shows provide this. In addition, many
reality shows provide the audience a degree of control in the final outcome of the
program. Shows such as Big Brother and American Idol allow audience voting and
participation in determining the eventual winner of these shows. Consequently,
advertisers and sponsoring partnerships have become increasingly eager to align
themselves with these types of programs. The increased revenue opportunities from
advertisers have subsequently led to the creation of more and more reality shows.
In addition to increased advertising revenue, reality television shows have also
proven to be less expensive to produce than more conventional forms of
programming. A typical one -hour drama on a commercial television network costs
around $2 million an episode. Studios will often lose money on the first airing of an
episode, but recoup that cost by selling the show for syndication. Reality TV shows,
however, can be produced for considerably less. Many of these shows cost only
around $1 million per one-hour episode. The reasons for this cost disparity are
simple: such shows have no regular cast to pay and often have a minimal writing
staff. They can also sometimes save on other production costs by using preexisting
homes or other similar means to avoid expensive set construction and labor costs.1
1Day, Dwayne. The Space Review www.thespacereview.com/article/165/1.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
15
II. ECONOMIC ANALYSIS OF THE FILM & VIDEO INDUSTRY IN
ARIZONA
EMPLOYMENT AND WAGE TRENDS
FILM INDUSTRY DEFINITION
The Arizona Department of Economic Security (DES) collects employment and wage
data through its quarterly Covered Employment and Wage (formerly ES-202)
survey. This data pertains to workers covered by Arizona unemployment insurance
laws and Federal civilian workers covered by Unemployment Compensation for
Federal Employees program. Employment and wage data is collected from
establishments in all 15 counties in Arizona and categorized by industry using the
North American Industry Classification System or NAICS. The data includes
average number of establishments, average employment, and total quarterly payroll
(or wages).
DES reports employment and wage data by NAICS from the year 2000 through the
present. Historical data prior to 2000 is reported by SIC code (the classification
system that NAICS replaced). Due to the fact that there is no perfect conversion of
SIC to NAICS data, the time series is discontinuous. For purposes of this analysis,
covered employment and wage data from 2000 through third quarter 2003 (the
latest data available) will be used.
Based on analysis of NAICS industries, the Film Industry is defined as the group of
three industries shown in Table 5.
Table 5 Definition of the Film Industry
NAICS Name
51211 Motion Picture and Video Production
51219
Postproduction Services and Other Motion Picture and Video
Industries
51212 Motion Picture and Video Distribution
Due to data disclosure requirements, data on industries 51211, 51219, and 51212
are combined into industry 512 -- throughout this report.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
16
STATE OF ARIZONA
In 2003, there was an average of 612 jobs within 177 establishments in the Film
Industry in Arizona Figure 1 shows the average number of jobs and establishments
in the film industry in Arizona from 2000 to 2003.2 Since 2000, average employment
in the Film industry declined in Arizona. Average employment decreased by 26.3%
from 830 jobs in 2000 to 612 jobs in 2003.3 By comparison, total employment in
Arizona increased 1.4% during this period.
While overall Film Industry employment declined between 2000 and 2003, the
number of Film Industry establishments in Arizona increased, albeit just slightly.
In 2000, there was an average of 169 establishments in the Film Industry in
Arizona, according to Arizona Department of Economic Security (DES). In 2003,
however, there was an average of 177 Film Industry establishments in Arizona.
Figure 1 Average Employment and Establishments
2 This data does not reflect those who are self-employed within the Film Industry and therefore
understates the number of people who make their living in the film and video business.
3 This decline could be attributed to, in part, the closing of the Fox Animation Studio.
Figure 1 - Average Employment and Establishments
Film Industry in Arizona
830
724
642
612
175 177
169 167
50
150
250
350
450
550
650
750
850
950
2000 2001 2002 2003
Average Employment
50
100
150
200
250
300
Average Establishments
Avg Employment Avg Establishments
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
17
Overall between 2000 and 2003 the Film Industry lost approximately 218 jobs or
26% of total jobs. During this timeframe the average annual salaries also declined
(Table 6). According to DES the average annual salary declined by 24.3% from just
over $47,252 in 2000, to $35,773 in 2003. Runaway production can in part be
blamed for the decline in jobs, but other factors include local production talent
leaving the state due to lack of work in Arizona, and inadequate resources to
effectively market the state to promote production business.
Table 6 2003 Average Annual Salaries for the
Film Industry in Arizona
NAICS Industry Name
2003 Average
Annual Salary
% chg from
2000 to 2003
512 - -
Motion Picture & Video
Production and Distribution $35,773 -24.3%
Source: Arizona Department of Economic Security.
METRO PHOENIX, METRO TUCSON, AND BALANCE OF THE STATE
The Arizona Department of Economic Security reports employment and wage data
by county. Film Industry employment and wage data was aggregated by three
regions of the state including Metro Phoenix (Maricopa and Pinal counties), Metro
Tucson (Pima County), and the Balance of the State (all counties except Maricopa,
Pinal, and Pima). Due to data disclosure requirements, all 12 rural counties in
Arizona are combined into the Balance of the State.
Table 7 shows the distribution of Film Industry employment in Arizona as of 2003.
There were about 370 Film Industry jobs (or 60.5% of total) in Metro Phoenix.
Another 158 jobs (or 25.8% of total) were located in Metro Tucson and 84 jobs (or
13.7% of total) in the Balance of the State.
Table 7 Film Industry Employment Distribution in
Arizona - 2003
Area
Average
Employment
% of
Total
Metro Phoenix 370 60.5%
Metro Tucson 158 25.8%
Balance of State 84 13.7%
Arizona Total 612 100.0%
Source: Arizona Department of Economic Security.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
18
Between 2000 and 2003, Arizona Film Industry jobs shifted out of Metro Phoenix to
Metro Tucson and the Balance of the State (Figure 2). The percentage of Arizona
Film Industry employment located in Metro Phoenix dropped from 68.7% in 2000 to
60.5% in 2003. During this period, about 199 Film Industry jobs were lost in Metro
Phoenix. On the other hand, the percentage of Arizona Film Industry jobs located in
Metro Tucson increased between 2000 and 2003. Metro Tucsons share of Arizona
Film Industry employment increased from 18.8% in 2000 to 25.8% in 2003. During
this period, Film Industry employment in Metro Tucson grew, but only by 2 jobs.
The Balance of the State has also captured a greater share of Film Industry jobs in
Arizona. However, the Balance of the State actually lost 20 jobs between 2000 and
2003, while the actual percentage of Arizonas Film Industry employment located in
the Balance of the State increased, from 12.5% in 2000 to 13.7% during 2003.
Figure 2 Arizona Film Industry Employment Distribution 2000 through 2003
Average annual salaries in the Film Industry in Metro Tucson and the Balance
of the State were between 48% and 55% of the average salary in Metro Phoenix
(Table 8). In 2003, the average annual salary for Film Industry jobs in Metro
Phoenix was $44,001. By comparison, the average annual salary was $24,222 in
Figure 2 - Arizona Film Industry Employment Distribution
2000 through 2003
68.7%
18.8%
12.5%
61.9%
23.2%
14.9%
61.5%
22.0%
16.5%
60.5%
25.8%
13.7%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Metro Phoenix Metro Tucson Balance of State
% of Arizona total .
2000 2001 2002 2003
Source: Arizona Department of Economic Security
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
19
Metro Tucson and $21,172 in the Balance of the State. Indeed, overall average
salaries in the Film Industry declined between 2000 and 2003 in all areas of the
State. During this period, while average salaries increased by 7.6% in Metro
Tucson, the decline in average salaries was 21.5% in Metro Phoenix and 41.6% in
the Balance of the State.
Table 8 Average Annual Salaries in 2003
Film Industry in Metro Phoenix, Metro Tucson &
Balance of the State
Region
2003 Average
Annual Salary
% chg
from
2000 to
2003
Metro Phoenix $44,001 -21.5%
Metro Tucson $24,222 7.6%
Balance of State $21,172 -41.6%
Arizona $35,773 -24.3%
Source: Arizona Department of Economic Security.
ECONOMIC IMPACT OF THE FILM INDUSTRY
The 2003 employment and wage data noted in the previous section was used to
calculate the economic impact of the Film Industry in Arizona. Direct employment
data from the industry was analyzed through the IMPLANPro economic impact
model to document indirect and induced multiplier effects of the industry to the
State. For a more detailed discussion of how the IMPLANPro model works, refer to
Appendix A.
As shown on Table 9 the Film Industry employed about 612 direct jobs in Arizona in
2003, on average. With total wages of about $21.9 million, the Film Industry, in and
of itself, generated over $107 million in direct economic activity (or output) through
the State of Arizona in 2003.
In addition to the 612 direct jobs, the Film Industry is responsible for maintaining
another 1,092 indirect and induced jobs in Arizona in 2003. These jobs include those
jobs that supply goods and services to those companies in the Film Industry as well
as those jobs supported by the spending of the wages from the direct and indirect
jobs. This means that for every 100 Film Industry jobs in Arizona, another 182 jobs
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
20
are needed to service and support the Film Industry. Overall, approximately 1,704
total jobs in Arizona were supported by the Film Industry during 2003.
These 1,704 direct and indirect jobs attributed to the Film Industry in Arizona
generated nearly $56.6 million in wages and $201.5 million in total economic
activity.
Table 9 Economic Impact of the Film Industry
on the Arizona Economy - 2003
Type Jobs Total Wages Output
Direct 612 $21,885,900 $107,345,900
Indirect 665 $20,856,400 $59,407,300
Induced 427 $13,856,600 $34,698,300
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
Table 10 illustrates the total economic impact of the Film Industry. Overall, NAICS
512-- (Motion Picture & Video Production and Distribution) provided a substantial
economic impact (in terms of total output) during 2003. Total economic activity (or
output) for this industry is estimated at $201.4 million. Approximately 1,704 total
jobs in Arizona were supported by this industry with total wages exceeding $56
million.
Table 10 Total Economic Impact of the Film Industry
on the Arizona Economy by NAICS 2003
NAICS Industry Name
Total
Jobs
Total
Wages
Total
Output
512--
Motion Picture & Video
Production and Distribution
1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic Security; IMPLAN.
Table 11 shows the estimated total economic impact of the Film Industry by the
three regions of the State. These regions include Metro Phoenix (Maricopa and
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
21
Pinal counties), Metro Tucson (Pima County), and the balance of the state (all
counties excluding Maricopa, Pinal, and Pima).
Approximately 67.8% of all jobs (or 1,155) supported by the Film Industry in Arizona
were located in Metro Phoenix. Metro Tucson captured about 23.4% of all jobs (or
399) affected by the Film Industry in Arizona. Also, some 149 jobs, or 8.7% of all
Film Industry jobs in Arizona, were situated in the Balance of the state. The
Balance of the state includes those counties not located in Metro Phoenix and Metro
Tucson.
The jobs affected by the Film Industry in Metro Phoenix generated over $43 million
in total wages and over $152 million in total economic activity. In addition, total
wages amounted to approximately $9.9 million in Metro Tucson and $3.3 million in
the Balance of the state. Total economic activity is estimated at $37.0 million and
$12.4 million in Metro Tucson and the balance of the state, respectively.
Table 11 Total Economic Impact of the Film Industry on the
Arizona Economy by Region - 2003
Area
Total
Jobs
Total
Wages
Total
Output
Metro Phoenix 1,155 $43,359,700 $152,051,200
Metro Tucson 399 $9,889,400 $36,997,200
Balance of the State 149 $3,349,800 $12,403,100
Total 1,704 $56,598,900 $201,451,500
Source: ESI Corporation; Arizona Department of Economic
Security; IMPLAN.
FILM FESTIVAL IMPACT
A separate analysis was performed for the most recent year of each the large film
festivals in Arizona. These film festivals include the Phoenix Film Festival,
Scottsdale International Film Festival, Sedona International Film Festival, and
Arizona International Film Festival. A web-based survey was used to obtain
information on these film festivals. This information ranged from attendance and
gross revenue to number of volunteers and number of films shown during 2003.
Only three of the four festivals participated in the survey.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
22
During 2003, attendance at the three film festivals was estimated at 19,800 people.
These festivals lasted about 18 days and showed 213 films. These film festivals are
mostly operated by volunteers. With only eight full time employees, about 230
volunteers ran the film festivals. According to the film festivals that responded to
this survey, in 2003 total gross revenue was approximately $240,000 with expenses
of $220,000 of which 76% was spent on goods and services in Arizona.
Approximately 7 percent of the film festival attendees were from out of town and
stayed an average of three nights resulting in $441,829 in direct spending.4 By
comparison, film festivals had a much greater impact on the Colorado economy.
During 2001, the latest data available, Colorado film festivals had attendance of
87,000 and generated about $12.6 million in spending. Some 60 full time employees
and 1,800 volunteers worked at these festivals.
Table 12 Impact of Arizona Film
Festivals in 2003
Total attendance 19,800
Percent from out of town 7%
Films shown 213
Days of festival 18
Full time employees 8
Volunteers 230
Gross revenue $240,000
Total expenses $220,000
% of expenses spent in Arizona 76.6%
Source: ESI Corporation
OUT OF STATE PRODUCTION IMPACT
The Arizona Department of Commerce tracks the value of film production
expenditures in the state generated from out of state production companies. The
last full year in which data is available is fiscal year 2003, during which there were
a total of 427 completed projects translating into an estimated economic impact of
$41.6 million being spent on wages to local crews as well as the procurement of local
4 Direct spending of overnight visitors is based on $106.26 spending per person per day. Data supplied
from the Arizona Tourism Statistical Report 2003, Arizona Office of Tourism and D.K. Shifflet and
Associates.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
23
goods and services. While there is no way of knowing precisely how much of the
Arizona film industry total impact (Table 11) can be attributed to out of state
production, the survey results do reveal anywhere from 10.9% to 25.7% of revenues
were derived from out of state sources suggesting that there is a basic (export)
component to the industry.
It is evident that out of state production is important to the local economy and it
helps stimulate the growth of the local film industry. Both are needed to help
sustain one another. Fostering the growth of Arizonas film industry will require a
two pronged approach; one that focuses on strategies for strengthening the local film
industry and the other promoting Arizona to out of state production companies.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
24
III. STRUCTURE OF THE FILM INDUSTRY IN ARIZONA
A set of surveys was conducted to gather information on the structure of the film
industry and to collect insights from knowledgeable individuals concerning the
states competitive advantages and disadvantages. The surveyed groups include the
following.
Film Festivals
High Schools
Community Colleges/Universities
Production Companies
In-house Production
Local Film Commissions
Film Industry Suppliers
Following are summaries of the surveys conducted.
FILM FESTIVALS
An email survey was distributed to contacts of four Arizona film festivals. Three of
the four surveys were received yielding a 75% response rate.
Film festival directors throughout the state were asked questions regarding their
festival events, which included questions about budgets, formats, employees, and
attendees. In the attempt to measure growth of these film festivals, some survey
questions focused on the first year and most recent year (2003) of the festival.
The oldest Arizona film festival began in 1990, and was a lone event until two more
festivals began in 2001. The film festivals have a small number of full time
employees. These festivals more heavily rely on volunteers. In 2003, the festivals
employed about 8 full time employees and utilized some 230 volunteers. According
to the film festivals that responded to the survey, about 7% of all festival attendees
are from out-of-town with the remaining 93% Arizona residents. The out-of-town
attendees typically used a hotel room for about 3.3 nights, on average. Attendance
for all film festivals has grown 164% since their inception.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
25
In 2003, the three festivals that responded to the survey took in approximately
$240,000 in gross revenue in 2003. In addition, the film festivals spent about
$170,000 (or 76% of total expenses) on goods and services in Arizona. See Figure 3.
The festivals were asked questions regarding the films shown and their relationship
to the state of Arizona in the year 2003. According to the respondents, an average of
29% of all films shown at the film festivals was shot either partially or entirely in
Arizona. Also, of all films shown during 2003, about 22% were produced by Arizona
producers.
Figure 3 Arizona Film Festivals Total Revenues and Expenses in 2003
HIGH SCHOOLS
A survey was emailed to 30 school districts, most of which were located in the
Phoenix metro area, to ascertain the curriculum and facilities in place to prepare the
workforce in the field of film production. A total of 7 surveys were completed
yielding a response rate of 23.3%. High schools were asked questions regarding their
film/video/digital programs, facilities, and students. The respondents indicated
enrollment ranging from 1,100 to 2,800 students. Of the schools surveyed, all
respondents offered camera operation programs and 71% offered film editing
programs. Film processing and animation were the least offered programs with 14%
and 29%, respectively, of respondents. (See Figure 4).
Out of the seven schools surveyed, six schools maintained a production facility. Of
those schools that maintained production facilities, all had video production
equipment and 86% had post-production equipment for video. Other film related
skills offered in some of the high schools surveyed were DVD production, multimedia
Figure 3: Arizona Film Festivals
Total Revenue and Expenses in 2003
$240,000
$220,000
$170,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Total Revenue Total Expenses Total Arizona Expenses
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
26
authoring, graphics, broadcast production, multi-camera broadcast, and non-linear
editing.
Figure 4 Percentage of Respondents Who Own Various Types of Equipment
COMMUNITY COLLEG ES/UN I V E R S I T I E S
Seventeen universities and community colleges received surveys via email. Three
surveys were returned from community colleges (none from the universities) for a
response rate of 17.6%. These surveys included questions regarding program,
facilities, faculty, and students as they apply to the film/video/digital industry. The
survey respondents were a part of programs that started as early as 1975 and as late
as 1985.
The respondents each offered a different focus in their programs ranging from
cinema history and editing/broadcasting/film/screenwriting to hands-on production
skills for video and media. The respondents offered degrees such as Associate in
Arts, Associate of Applied Science, and Video Production Technology. In addition,
Figure 4: Percentage of High Schools
who own Various Types of Equipment
0% 20% 40% 60% 80% 100%
Production Facilities -
Film
Post-Production Facilities
- Editing (Film)
Post-Production Facilities
- Film Processing
Production Facilities -
Sound Stages
Post-Production Facilities
- Sound Sweetening
Production Facilities -
Digital/HD
Post-Production Facilities
- Editing (Digital/HD)
Post-Production Facilities
- Editing (Video)
Production Facilities -
Video
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
27
two-thirds of respondents offered production-specific skill sets including Film/TV
studies, Broadcast Journalism, Telecommunications, and Media.
PRODUCTION COMPANIES
An email survey was distributed to 346 production companies within the state. A
total of 46 surveys were returned, which yielded a response rate of 15.3%. These
surveys included questions regarding size, specialty, financial inputs/outputs,
production output, and hiring practices. Nearly 50% of the production companies
that responded were started between 1990 and 2000. In addition, approximately
32% of the production companies were started between 1980 and 1990, 11% began
after 2000, and the remainder (7%) was created prior to 1980. Of the 46 companies
surveyed, 39 strictly produce, 6 companies both produce and distribute, and one
company declined to answer.
Nearly 80% of all respondents took part in commercial and industrial/corporate film
production and/or distribution. In 2003, the respondents indicated they took part in
550 projects spanning the industry from feature films to internet productions.
The production companies surveyed were primarily small businesses and had
anywhere between one and 28 full time employees with an average of approximately
three full time employees. The primary sources for employee recruitment included
word-of-mouth (76% of all respondents), professional associations (39%), and
internships (24%). See Figure 5. The revenues of all production activities in 2003
met with varied responses. Of the production companies surveyed, only 39 provided
revenue detail. Among this group of 39 respondents, revenue during 2003 totaled
approximately $10.1 million with a top revenue estimate of $3.25 million. An
average of 25.7% of this gross revenue was derived from out-of-state sources.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
28
Figure 5 Sources of Recruiting that Producers Utilize
Figure 5: Sources Used by Producers for Recruiting
Workforce
0%
0%
0%
2%
2%
4%
4%
4%
7%
11%
17%
24%
39%
76%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Community Bulletin
Radio
TV
Job Agencies
Other Training Schools
Advertisements
Internet
Trade Publications
Apprenticeships
Technical Schools
College/University
Career Centers
Internship Programs
Professional
Associations
Word-of-Mouth
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
29
IN -HOUSE PRODUCTION
Email surveys were distributed throughout the state to 16 non-film related
organizations, public and private, with in-house production capabilities. In-House
production refers to an organization that has its own production facility and
produces its own media without having to contract out-of-house for services. A 50%
response rate was achieved for this survey. The in-house production survey included
questions regarding their facilities, equipment, production types, and costs.
In 2003, 75% of the in-house production was of industrial/corporate films and
training videos (See Figure 6). The estimated fixed cost including payroll for these
companies and organizations in 2003 ranged from $10,000 to $1,000,000 with an
average of $230,000. Outsourced production for the same year ranged from $0 to
$200,000 with an average of approximately $53,000. Of the outsourced production,
roughly 43% was outsourced to companies within the State of Arizona.
Most of the in-house production facilities surveyed were formed during the late-
1980s. There was an average of five full time employees per production facility
surveyed. About 63% of the respondents owned production facilities that were less
than 5,000 square feet, 13% had 5,000 to 10,000 square feet, and 25% owned
between 10,000 and 15,000 square feet. Every company and organization surveyed
described their production facility equipment as video based while one respondent
also had digital/HD equipment.
LOCAL FILM COMMISSIONS
An email survey was transmitted to 17 Film Commissions within the State
of Arizona. A total of 7 surveys were gathered yielding a 41.2% response rate. Film
Commissions throughout the state were asked questions regarding their employees,
financial inputs/outputs, and latest projects. The Film Commissions surveyed
started operations between 1974 and 1996. Over half (57%) were started during
the 1980s, 14% in the 1970s, and 29% in the 1990s. The funding for the
film commissions or primary contact positions were funding by various sources
(Figure 7).
The Commissions were asked questions regarding their 2003 budget. Six reported
budget figures ranging from $1,000 to $200,000. The Film Commissions surveyed
had about two full time employees, on average, and focused on film projects. Three
Film Commissions revealed that commercials produced and/or post-produced in
Arizona had a total budget of over $30 million in addition to just over $31 million for
feature films in the state.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
30
Figure 6 In-House Film/Video Production in 2003
Figure 6: In-House Film/Video Production in 2003
0%
0%
0%
0%
0%
13%
38%
38%
38%
50%
50%
75%
75%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Infomercials
Interstitial
Sports Programming
Music Video
Other:
Commercials/Promos
Documentaries
Stock Footage
Internet
Television and Cable
Stills
Industrial/Corporate Film
Training Videos
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
31
Figure 7 Percentage of Local Film Commissions by Types of Funding
FILM INDUSTRY SUPPLIERS
A survey was emailed to 240 supply companies that primarily serve the
film/video/digital industry. A 13.3% response rate was achieved with 32 completed
surveys. Industry supply companies were asked questions regarding their services,
employees, and financial inputs/outputs.
Approximately 44% of respondents provided equipment, camera, or lighting/grip.
Some 33% of respondents indicated they provide trucks/mobile equipment, and 11%
of respondents described sound stage/studio with another 11% listing film/tape postproduction
as their core business. The companies surveyed provide a wide range of
services to many parts of the film/video/digital industry. The majority of
respondents, about 97%, primarily served the segment of the film industry that
creates commercials. (See Figure 8).
Figure 7: Percentage of Local Film Commissions
by Types of Funding
0%
0%
14%
14%
14%
14%
29%
43%
57%
0% 10% 20% 30% 40% 50% 60%
Economic Development
Grants
Tourism Board
County Funding
Local Fund Raising
Other, Please Specify
Private Sector
Chamber of Commerce
City Funding
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
32
The surveyed companies had between one and 400 full time employees. The average
number of employees per company was 17. The estimated total revenue in 2003 was
almost $5.1 million. An average of 10.9% of this gross revenue was derived from
out-of-state sources.
Figure 8 Percentage of Respondents Who Supplied the Following Segments of
the Film Industry
Figure 8: Percentage of Respondents
Who Supplied the Following Segments
of the Film Industry
21%
38%
45%
48%
52%
55%
66%
69%
69%
69%
76%
76%
83%
97%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other, please specify:
Sports Programming
Stock Footage
Internet
TV/Cable: Episodic
TV/Cable: Movie of the Week
Music Videos
TV/Cable: Single/Special
Short Films
Documentaries
Feature Films
Stills
Industrials/Corporate Films
Commericals
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
33
SURVEY FINDINGS SUMMARY
Overall, the respondents of these surveys agreed that Arizonas assets for a film
production could be more effectively promoted. When asked about the top issues
facing the state film industry, the main concern of the respondents was the apparent
lack of production business that is brought to Arizona. This lack of business has
manifested into intense competition for the limited number of productions that take
place in Arizona. As a result, budget undercutting and substantially low budgets
have effectively priced certain firms out of the market. The most frequently stated
reasons for the lack of production business in Arizona specifically include lack of
support and promotion from the State, lack of incentives, and lack of a directory of
facilities, locations, and professional technicians.
A majority of the respondents perceived that there is a lack of support at the state
level in the form of promotion and advertisement of Arizonas locations and
professional technicians. It was indicated that the stigma with Arizona is the
industry as a whole thinks there are not enough skilled people in Arizona.
Compounding this problem is the lack of production projects in the state which has
led to an exodus of talented professional s who have followed the business elsewhere.
The following Table 13 highlights the top responses by respondent type. Clearly the
number one issue mentioned was the perceived absence of support or importance
placed upon film industry, followed by the lack of marketing, and the lack of
incentives.
Table 13 Top Issues by Type of Survey Respondent
Issues
Film
Festivals
High
Schools
Comm.
Colleges
Prod.
Cos
In-
House
Prod.
Local Film
Commissions
Industry
Suppliers
Lack of Marketing X X X X X
Negative Image X
Lack of Incentives X X X X
Permits X X
Regulations X X
Lack of Business
Directory X X X
Lack of Location
Directory X X X
Lack of Projects X X X X
Lack of Funding X X X
Competition X X X X
Support/Importance X X X X X
Source: Surveys conducted by ESI
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
34
IV. BEST PRACTICES/BENCHMARKS
In order to benchmark Arizonas Film Office in terms of the services it offers and its
related economic impact to the state, a group of states, who are primary U.S.
competitors to Arizona was targeted, to reveal their successes at luring film
production. Based on feedback from the Arizona Department of Commerce and the
industry, telephone interviews were conducted with film commission offices in
Texas, Utah, Nevada, New Mexico, Florida, and Colorado. They were asked
questions regarding the economic impact of the film industry, financial incentive
plans used in their state, services that the film commission offers, and details on
their staff, budget and marketing plans.
ECONOMIC VI T A L I T Y
Similar to Arizona, the film industry has significant economic impacts to the
economies of the following states.
TEXAS
In Texas, the film industry generated approximately $165 million in direct spending
in 2003, according to the Texas Film Commission. This spending is higher than
previous years and is generally attributed to the growth of local film technician and
equipment jobs. As a result, hiring of local crews typically accounts for 80% of the
total crew working on productions in Texas. According to the Texas Film
Commission, approximately 45 to 55 productions take place in Texas each year.
Indeed, according to the Texas Film Commission, this level of production is
anticipated to remain unchanged during 2004. To measure the economic impact that
a production has on the state, the Texas Film Commission speaks directly with the
producers to obtain the production budget information. They do not use multipliers
in their estimates.
UTAH
In 2003, about 135 productions took place in the State of Utah. These productions
generated about $80 million in revenue. Over the past decade, the film industry in
Utah generated approximately $1 billion in revenue. During 2004, revenue from
film productions is expected to be half of that experienced in 2003, according to the
Utah Film Commission. They attributed the decline to the Screen Actors Guild
strike, runaway production, and the increase in reality-based television. The
movies-of-the-week segment of the film industry, historically a major component of
Utahs film industry, declined over the past few years due to the increasing amount
of reality television shows. This situation is expected to adversely affect film
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
35
production activity in Utah in 2004. Another component of the film industry in
Utah is its strong crew base. According to the Utah Film Commission, the
availability of local crews attracts a significant number of productions to Utah.
Indeed, local hiring accounts for as much as 90% of all hiring on a production. To
determine the economic impact, the Utah Film Commission communicates directly
with the producers and uses a worksheet that details the amount of money spent
inside the state. They do no t use multipliers in their economic impact estimates.
NEVADA
The film industry in Nevada generated about $100 million in revenue in 2003.
Annual revenue from the film industry nearly doubled during the past four years.
The Nevada Film Commission revealed that heavy marketing and promoting by its
staff was a major contributing factor to the increase in revenue from film production.
This marketing resulted in about 500 film productions in Nevada each year. The
film industry significantly impacts tourism in Nevada. According to the Nevada
Film Commission, tourism in Nevada (particularly in Las Vegas), improved due to
the production of movies such as Oceans 11 and TV shows like MTVs The Real
World. These productions are essentially free publicity. When calculating the
economic impact, the Nevada Film Commission supplies producers with a form
explaining the information they need. If this information is not available from the
production company, the Film Commission uses a formula provided by the
Association of Film Commissioners International (AFCI) which is based on the type
of picture being produced. They do not use multipliers to determine the complete
economic impact estimate.
NEW MEXICO
In New Mexico, the economic impact of film production increased ten-fold between
2002 and 2003. According to the New Mexico Film Commission, the economic
impact in 2003 was $80 million compared to $8 million in 2002. The substantial
jump in economic activity from the film industry was primarily attributed to the new
aggressive incentive plan enacted in 2001. This plan incorporates sales tax breaks
and a no-fee incentive when filming at any state site. The New Mexico Film
Commission obtains economic impact information directly from the production
companies. They do use multipliers in their impact estimates, but during a
telephone interview declined to define them specifically.
COLORADO
According to the Colorado Film Commission, the film industry had an economic
impact of approximately $30.4 million in 2002. Over the past two decades, the film
industry in Colorado was unstable, but experienced a noticeable growth of
production between 1985 and 1990. Recently, the general television industry switch
from production of movies-of-the-week to reality-based television shows also had a
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
36
negative impact on the Colorado economy. Reality television shows typically have
lower production costs and generate less money into the state economy than do
movies-of-the-week. In 2001, approximately $205.5 million in wages and 3,933 jobs
were generated from film and video production, freelance crews, and suppliers. It is
estimated that 90% of total crew costs are paid to in-state workers, which positively
impacts the Colorado economy. According to the Colorado Film Commission, the
state experienced production in almost every part of the state. Indeed, 40 out of the
64 counties were locations for production in 2002. To estimate the economic impact
the Colorado Film Commission uses follow up phone calls to obtain all relevant
information from the production companies. They do not use any multipliers in
their analysis.
FLORIDA
In Florida, film industry employment nearly doubled between 1995 and 2001. The
years 2001 and 2002 were difficult due to the anticipation of the SAG and DAG
strike, 9/11, the dot.com bust and slowing of the national economy. Unfortunately,
staff at the Florida Film Commission was reluctant to be interviewed.
ARIZONA
The Arizona Department of Commerce tracks the value of film production
expenditures in the state. The last full year in which data is available is fiscal year
2003. During 2003 the estimated value of production expenditures was $41.6
million, attributed to 427 film productions. This figure is conservative in that it
includes only those expenditures reported to the Department by the production
companies. The trend in production in Arizona is down from 2001, in which $63.6
million of filming was conducted. A partial list of the types of productions in 2001
includes seven feature films, one telefeature, episodes from four television series,
and one television special.
The decline in production in Arizona can be attributed to several things. First, the
migration of producing movies-of-the-week to realty based television, runaway
production, and lastly dramatic budget cuts and staff turnover of the Film Office
within the Arizona Department of Commerce. The budget for film promotion has
decreased by more than 45% since fiscal year 2001 as can be seen in Figure 9.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
37
Figure 9 Arizona Department of Commerce Film Office Budget
Figure 9 - Arizona Department of
Commerce Film Office Budget
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
38
INCENTIVES
Financial incentives have a substantial impact on drawing production, according to
film commission directors. In an effort to lure production, most states interviewed
adopted legislation that incentivizes production companies mainly in the form of tax
breaks. Following is a discussion of the incentives offered by the group of states
included in the interviews. Table 14 includes a summary of these incentives.
TEXAS
The incentive plan in Texas includes an on-the-spot 100% sales tax exemption from
state and local taxes. It also includes a hotel occupancy waiver when film crews stay
for 30 or more consecutive days. Producers can also receive a refund on fuel used in
generators, boats, and other unlicensed vehicles.
UTAH
Utah offers a sales and use tax exemption, in the form of a 10% rebate on dollars left
in the state, and up to 12% if the story line is set in Utah. The rebates are typically
administered at the end of a production. This is new legislation in Utah. After one
week of being enacted, the number of film applications increased dramatically.
NEVADA
According to the Nevada Film Commission, Nevada currently does not offer any
financial incentives for filmmakers. This is due to a lack of funding and legislation
to support an aggressive incentive plan. The Film Commission is currently
researching the types of incentives that would most benefit their state.
NEW MEXICO
Based on interviews and research conducted by ESI, New Mexico has one of the
most well known and most aggressive incentive plans. Two types of tax incentives
are offered.
A gross receipts tax deduction between 5% and 7% is taken at the point of
sale.
A 15% film production tax credit. This is a fully refundable credit of 15% of
eligible direct production costs against the filmmakers income tax.
A no-fee incentive when filming at any state site. For independent
productions they offer no -interest loans of up to $7.5 million for qualifying
time.
COLORADO
Colorado hotels are allowed to offer rebates on the hotel sales tax beyond a 31-day
stay. This rebate is at the discretion of the hotel owner and can vary in
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
39
amount/percentage rebated. No other incentives are offered by the State of
Colorado.
FLORIDA
Florida offers two types of incentives for film production. A sales and use tax
exemption is provided for qualified film production expenses. This exemption is
taken at the point of sale for those produc tions that are registered and certified with
the Florida Film Commission prior to production taking place. In addition, Florida
offers a reimbursement of a percentage of qualified expenses for productions
companies, digital media effects entities, and relocation entities. Production
companies are eligible for reimbursement of 15% of total qualified expenses. This
reimbursement applies to a minimum of $850,000 in qualified expenses. The
maximum reimbursement ranges from $15,000 for Industrial or Education Films to
$2 million for movies. Digital effects media entities are eligible for a rebate of the
lesser of 5% of gross revenues or $100,000. Relocation entities are eligible for a
rebate of the lesser of 5% of gross revenues or $200,000.
ARIZONA
Arizona offers a 50% transaction privilege (sales) tax rebate to qualifying production
companies for motion picture/television/video, and commercial advertising
productions filmed in Arizona. The hotel occupancy tax is also waived if the stay is
over 30 days. In addition vehicles entering Arizona for the sole purpose of
production are exempt from the state fuel tax. Arizona also does not require the
withholding taxes of nonresident wages.
In discussions with the production companies and local film commission staff, very
few companies have taken advantage of Arizonas incentives due to the difficulty in
complying with the administrative rules established by the Arizona Department of
Revenue.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
40
Table 14 Film Production Incentives for Selected States
Incentives Texas Utah Nevada
New
Mexico Colorado Florida Arizona
Sales/use tax
exemption
100% off
(state &
local taxes)
10% to 12%
off n/a
100% off
(state tax
rate of 6%)
n/a
100% off
(qualified &
certified
expenses)
50% rebate
on sales tax
(if spending
is over $1m)
Hotel occupancy
tax
100% off
(if stay is
over 30
days)
n/a n/a n/a
Some rebate (if
stay is over 30
days)
n/a
100% off
(if stay is
over 30 days)
Fuel tax Full refund n/a n/a n/a n/a n/a
Exemption
for
production
vehicles
Income tax credit n/a n/a n/a
Credit equal
to 15% of
total
production
costs
n/a n/a n/a
Low-interest loans n/a n/a n/a
Available for
Ind.
productions
n/a n/a n/a
Other rebates /
exemptions n/a n/a n/a n/a n/a
5% to 15%
of qualified
production
expenses 1
No
withholding
tax of
nonresident
wages
Total production
spending in 2003 $165m $80m $100m $80m $30.4m n/a $42m
Notes
1 Florida offers a rebate of 15% of qualified expenses for production companies and 5% of expenses for either
digital media effects companies or relocation companies. The production company rebate requires minimum
expenses of $850,000 and limits the rebate to $15,000 to $2 million depending on the type of production.
The rebate for digital media effects companies is maxed at $100,000. The maximum rebate for relocation
companies is $200,000.
Source: ESI Corporation; Arizona Department of Commerce and Various Film Offices.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
41
FILM COMMISSION SERVICES
Film commissions offer a number of services aimed at reducing the time and money
producers spend on scouting and securing locations for productions. Most of the
services are found on each states website and are summarized below.
TEXAS FILM COMMISSION (WWW.GOVERNOR.STATE.TX.US/FILM)
Texas offers a large diversity of locations to meet the needs of producers. These
locations are displayed through an online location library of pictures found on the
Texas Film Commissions website. This website also includes information on
weather, state laws, links to regional film commissions, permanent set descriptions,
and a FAQs page. Texas has an online production manual that provides contacts for
local crews and production companies around the state.
UTAH FILM COMMISSION (WWW.FILM.UTAH.GOV)
Utah also offers an extensive location library online; many locations can be viewed
through their website. The crew base in Utah is heavily promoted and information
is provided through a resource guide that can link production companies to local
crews. The state film commission also provides an online application of the required
state permits.
NEVADA FILM COMMISSION (WWW.NEVADAFILM.COM)
The Nevada Film Commission website includes a location library and provides links
to local crews and production companies. Permit information and links to the
permit applications are also provided. Many vendors and businesses, ranging from
hotels to production-related businesses, are listed on the website. Interviews with
the Nevada Film Commission revealed that they attend trade shows and make sales
trips across the country to attract producers to their state.
NEW MEXICO FILM COMMISSION (WWW.EDD.STATE.NM.US/FILM)
New Mexico provides an online location library, weather and elevation facts, crew
and equipment links, and links to local film offices on the Commissions website.
They also provide samples, applications, and Internet links to state and city land
permits on their website.
COLORADO FILM COMMISSION (WWW.COLORADOFILM.ORG)
Colorado presents an online photo library online and production guide. The
production guide includes information on local crews, production, and postproduction
resources. The Colorado Film Commission website includes contact
information and procedures on how to obtain the various city, state, and federal land
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
42
permits that are required for filming in Colorado. Information on labor laws,
weather, roads, locations, and guilds and unions is also available.
FLORIDA FILM COMMISSION (WWW.FILMINFLORIDA.COM)
Florida offers a photo library and links to local production crews, local film
commissions, and permit applications. In helping to find locations for films, the
website contains a detailed location form to be filled out by producers. The Florida
Film Commission uses this form to match the producers requests to relevant
locations in Florida. Florida has an extensive discounts and deals section which
consists of production companies, hotels, and other businesses in Florida that offer
discounts on film-related business.
ARIZONA FILM COMMISSION (WWW.AZCOMMERCE.COM/FILM)
Arizona offers online permit information and applications for various permits
required to film in the State. The Arizona Department of Commerce Film Office
provides an online, searchable production guide. This production guide includes
contact names, phone numbers, and information on local technicians/crews,
equipment, and facilities. A breakdown of financial incentives is described on the
website. Links to current weather, as well as local film offices and festivals are
offered.
SU PPORT AND MARKETING
State and local film commissions generally employ a small number of people and use
varying marketing methods to promote locations within their state. Details about
each state film commission staff is listed below.
TEXAS
The Texas Film Commission employs eight people with an operating budget of
$500,000. Only a small percentage of the budget is used on marketing. The
Commission relies heavily on their website and does not participate in direct mail or
print media. The Texas Film Commission coordinates with local film offices during
their annual marketing trip to an event they host in Los Angeles. This event is
sponsored by the Texas Film Commission and targets producers, directors, and
studio executives. This event has proven to be a very effective strategy in promoting
Texas as a film location. The main challenge of the Texas Film Commission is the
lack of incentives to compete with other states which stems from the difficulty of
passing incentive legislation through their state government.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
43
UTAH
The Utah Film Commission employs six people and has a budget of $626,000.
Approximately $60,000 of the budget is spent on marketing per year. The Utah
Film Commission primarily relies on their website for most of its marketing. They
also attend trade shows and send out direct mail. The Utah Film Commission
coordinates with the local film offices to update the location library, host production
groups, and employ marketing at trade shows. Currently, the Film Commissions
main challenge is o btaining more incentive legislation to attract production.
NEVADA
The Nevada Film Commission has a staff of seven people and a budget of $800,000.
About $130,000 is set-aside for marketing. Their office finds trade shows to be an
effective marketing tool. The effectiveness of direct mail was questioned. The
website of the Nevada Film Commission is their main marketing tool and has
proven to be successful in offering information to producers. There are no local film
offices in the State of Nevada.
NEW MEXICO
The New Mexico Film Commission staff is comprised of eight employees. Since the
New Mexico Film Commission would not participate in a telephone interview,
information on budget and marketing is not available.
COLORADO
The Colorado Film Commissions staff was eliminated in 2003. The functions of the
Film Commission office were transferred to the Department of Tourism. In the past,
they have found a combination of direct mail, trade shows, and media advertising to
be a highly effective marketing strategy. Overall, their website is considered the
most important marketing tool. The Colorado Film Commission constantly
communicates with the local film offices and uses broadcast email to the local offices
to help locate potential film locations across the state.
FLORIDA
Staff of the Florida Film Commission was not available to participate in a telephone
interview or email questionnaire. As a result, information on the number of staff,
budget, and marketing is not available.
ARIZONA
The Arizona Department of Commerce Film Office employs two people and has a
budget of $291,100, of which 15% is spent on marketing. The size of the staff is
down from seven people during the year 2001.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
44
BEST PRACTICES SUMMARY
The film industry has a significant economic imp act on the states interviewed and /or
researched by ESI, including Texas, Utah, Nevada, New Mexico, Colorado, and
Florida. These states recognize that the film industry brings money from outside
the state and creates relatively high-paying jobs that support the film industry
which otherwise would not exist. These states have become aggressive in their
pursuit of film production because of the limited number of film productions in the
U.S. due to runaway production outside the country. Incentive programs,
production and scouting services (website, database of local crews, location pictures),
and promotion (trade shows, direct marketing) have been undertaken in order to
maintain and enhance the presence of the film industry in their state. New Mexico
is the most prominent example of the significant results that are possible with an
aggressive film industry campaign. Upon enacting a series of sales tax exemptions,
income tax credits, and no -interest loans effective in 2003, the economic impact of
the film industry in New Mexico went from $8 million in 2002 to $80 million in 2003.
With the right mix of incentives and marketing, there is no reason to believe that
the film industry could not have such a substantial impact in Arizona.
HOW DOES ARIZONA COMPARE
Arizona offers a few incentives for film production. A rebate is offered in the amount
of 50% of sales taxes paid on the purchase or lease of personal property to qualifying
production companies. This rebate is available for purchases over $1 million. All
hotel occupancy taxes are waived for stays over 30 days and vehicles entering
Arizona for the sole purpose of production are exempt from the state fuel tax. In
addition, withholding tax of nonresident wages is not required. Due to the
Department of Revenues administrative procedures, we are told that very few
companies take advantage of these incentives.
The current budget of the Arizona Department of Commerce Film Office is $291,100
with a staff of two. About 15% is spent on marketing and promotion. A summary
table highlighting the budget and staff size for each of the benchmarked states is
provided in Table 15.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
45
Table 15 Comparison of Budget and Staff Size for Selected States
State Total Budget Marketing Budget Size of Staff
Texas $500,000 Small percentage 8
Utah $626,000 $60,000 6
Nevada $800,000 $130,000 7
New Mexico1 n/a n/a 8
Colorado2 n/a n/a n/a
Florida3 n/a n/a n/a
Arizona $291,100 $43,650 2
Notes
1 The State of New Mexico Film Office refused to provide requested information.
2 The State of Colorado Film Office was eliminated in 2003.
3 The State of Florida Film Commission staff was not available to participate in a telephone interview.
Source: Arizona Department of Commerce and interviews conducted with the various Film Offices
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
46
V. ARIZONAS COMPETITIVE ADVANTAGES AND
DISADVANTAGES
Phone interviews were conducted with 23 out-of-state producers in eight segments of
the film industry during the month of June 2004. The segments of the film industry
include commercials, TV series, features, telefeatures, industrial, music videos,
documentaries, TV specials, and stills. A total of 95 producers were contacted (on
several occasions) resulting in 23 completed interviews. The producers were asked
questions regarding film production in Arizona as well as their perception and
experience in film offices practices, marketing, incentives, and the hiring of crews.
F I L M I N G I N ARIZONA
The producers were asked questions on production in Arizona, including when they
filmed, why Arizona was chosen, their likes and dislikes about filming in the state,
and how the Film Commissions services were used.
20 out of the 23 producers (87%) interviewed had previously filmed in Arizona.
Of the 3 that had not previously filmed in the state, two producers indicated their
plans to film in Arizona in the future.
The primarily reasons for filming in Arizona included the unique scenery,
consistent weather, and diversity of locations. Many productions have been
brought to Arizona because of the need for both a winter look (such as Flagstaff)
and a desert look. Arizona was also mentioned as a film-friendly environment in
that residents and local governments were very helpful.
All of the interviewed producers that had previously filmed in Arizona would
consider Arizona as a location for future productions.
When asked what they liked about filming in Arizona, most producers simply said
that it was an easy shoot. There was not a lot of red tape and the local
municipalities were helpful. The consistently sunny weather and reasonable
location fees also contributed to the ease of shooting.
Common dislikes of filming in Arizona included the lack of studios, crew, and
equipment. While many producers agree that Arizona has a strong talent base,
they have also noticed a large percent of the workforce moving to surrounding
states to work. Other problems include the difficulty in working with the Native
American tribes.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
47
Out of the 20 producers that filmed in Arizona before, 75% reported using the
services provided by the state or local film commissions, 10% used the Arizona
Department of Commerce Film Office but had encountered problems, and 15% did
not contact the Arizona Film Office at all. The Arizona Department of Commerce
Film Office services that were most used by the producers included scouting
locations through pictures and in-person, help and advice in dealing with the
different required filming permits around the state, and helping them to locate
additional crew and equipment. Of the two producers that had problems with the
film commission, the main problems were lack of communication and difficulty
with the website.
FILM COMMISSION SERVICES
The producers were asked to identify some of the most beneficial services that film
commissions can offer. These answers did necessarily to pertain specifically to the
Arizona Department of Commerce Film Office.
The most common service utilized by producers is online location pictures, which
can be downloaded or emailed to the producers and their clients. Another useful
film commission service is help with locating additional crew and equipment as
well as helping to facilitate the film permitting process. Producers also use the
state and local film commissions to coordinate with different organizations and
governments, especially in negotiations with state Native American tribes.
61% of producers mentioned location scouting and online pictures as a
tremendous asset from the film commissions. About 48% of respondents
mentioned help and advice with obtaining permits required to film on federal,
state, city and tribal land.
LOCATION FACTORS
Producers were asked which factors help them choose a location for a production.
87% of the respondents determine the location of the ir production based on the
location and scenery needs of the client or director.
22% said that money is a primary factor in the decision making process.
Other factors mentioned are how film-friendly a state is, lodging accessibility for
crew, and relations with union, guilds, and crews in the area.
RESEARCHING LOCATIONS
Producers were asked the means they use to obtain information on potential
locations. The producers were specifically asked how often they attended trade
shows, visited local and state websites, used brochures and other information pieces,
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
48
relied on word-of-mouth and previous experience, or contacted the local or state film
offices.
About 22% of the producers interviewed attended tradeshows at least some of the
time but usually only attended the Show Biz Expo in Los Angeles.
91% of the producers interviewed reported that the film commissions website is
the main tool used for obtaining information. The website was perceived to be the
quickest and easiest means of information gathering.
39% of the interviewed producers look at brochures and other printed materials.
18 of the 23 (78%) producers gather information through word-of-mouth.
17 out of 23 (74%) producers consider previous experiences filming in the state.
22 of the 23 producers contact the local or state film commissions by telephone or
mail to gather information on locations.
INCENTIVES
The producers were asked questions regarding if, to what extent, and what type of
incentives affect their choice for a production location. The findings of this survey
are summarized below.
35% of the producers interviewed revealed that financial incentives are a
consideration in choosing a production location. However, it appears that the
financial incentives are most meaningful when multiple locations are being
considered.
Only 8% of producers interviewed indicated that financial incentives were the top
priority in their choice of a production location.
Producers agreed that financial incentives only play a role in large budget
productions such as feature films and TV series.
The main financial incentives that would be attractive to production were sales
tax breaks and tax credit rebates. Other financial factors include filming permit
fee waivers, lodging and hotel discounts, and discounts from production vendors.
Non-financial incentives such as streamlining the permit process to save time
were mentioned.
LOCAL HIRING
Producers were asked about local hiring of production and post-production crew.
The results of these questions, focusing on the training and employment of local
crew, are summarized below.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
49
87% of producers interviewed do not use any local post-production services. Most
take their film back to Los Angeles or New York for post-production.
About 13% of the interviewed producers utilize some local post-production, such
as film processing.
87% of the interviewed producers use local crews and rent equipment locally.
Indeed, most hire about 50% of their crews locally, some hire as much as 90%
locally.
87% of producers interviewed view having previous experience related to the
position they are hiring for as the primary hiring consideration.
PERCEPTION OF ARIZONA
Producers were asked about their overall perception of filming in Arizona and what
they thought could be done to attract more production to the state.
All of the interviewed producers held a favorable view of Arizona as a potential
film location.
A common suggestion for improvement was making all information easy to
access. It was recommended that this could be solved by having an in-depth
website that covered all information producers could possibly require.
It was also recommended that the state build on its studio and crew foundation,
as this is a tremendous draw of production.
Nearly all producers mentioned promoting the unique scenery of Arizona more
aggressively to draw more attention.
COMPETITIVE ADVANTAGES/DISADVANTAGES SUMMARY
Arizona has both competitive advantages and disadvantages with respect to the film
industry compared to other states. Despite the competitive disadvantages noted
below, Arizona has a growing pool of industry leaders and , if properly tapped, this
new blood of leadership can help facilitate the growth of the film industry in
Arizona.
COMPETITIVE ADVANTAGES
Arizona has a number of competitive advantages with respect to film production.
The infrastructure to attract a robust film industry already exists in Arizona, and
includes a base of local talent, film technicians, available film production
equipment, and facilities (i.e. soundstages).
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
50
Most of the producers interviewed for this study indicated that Arizona is an easy
location to shoot a film. Compared to other states, Arizona is perceived to be less
bureaucratic when arranging a film production.
In addition, producers look favorably on Arizona due to labor environment and
cost. Since Arizona is a right-to-work state, producers do not have to deal with
local unions or guilds.
COMPETITIVE DISADVANTAGES
Arizona also has some competitive disadvantages with respect to film production.
These disadvantages could certainly be overcome.
Arizona has a perceived lack of available workforce, technicians/crews,
equipment, and facilities.
There is a lack of awareness among the film industry, in general, about Arizona
as a potential shooting location.
Compared to other states, Arizona lacks the financial resources, marketing, and
staffing to effectively compete for film productions taking place in the U.S. every
year.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
51
VI. FINDINGS AND RECOMMENDATIONS
SUMMARY OF FINDINGS
Since 2000, employment declined in Arizonas film industry by about 26.3% from
830 jobs in 2000 to 612 in 2003. By comparison, total employment in Arizona
increased by 1.4% during this same period. Indeed, most of the job losses
occurred in Metro Phoenix. Some 199 film industry jobs were lost in Metro
Phoenix between 2000 and 2003. The balance of the state also experienced loss of
jobs, as this area had 20 fewer jobs in 2003 than it did in 2000. Metro Tucson did
experience growth in film industry employment, but just slightly, as Metro
Tucson only gained 2 net jobs from 2000 to 2003.
In addition to the statewide loss of film industry jobs, average salaries in the film
industry declined statewide between 2000 and 2003. Average annual salaries for
film industry jobs in Arizona as a whole dropped by 24.3% to $35,773 in 2003.
Metro Phoenix and the balance of the state saw declines in average salaries.
From 2000 through 2003, average salaries for film industry jobs in these regions
decreased by 21.5% and 41.6%, respectively. Metro Tucson, on the other hand,
experienced an average salary increase of 7.6% from 2000 to 2003. The
discrepancy between job losses in Metro Phoenix and the balance of the state and
job gains in Metro Tucson can possibly be attributed to the qualifications of
certain segments of workers. With the increased reliance on the highly technical
post-production process, the demand for these workers has increased. And with a
large percentage of the highly technical workers located in Metro Tucson and
Metro Phoenix, it stands to reason that the change in their employment trends
has an influence on the overall trends in Film Industry employment, and why
the statewide differences in employment trends exist.
In 2003, the film industry generated over $201 million in economic activity and
nearly $57 million in wages in Arizona.
Film festivals held in Arizona also contribute to the Arizona economy. In 2003,
the three operating film festivals brought in approximately $240,000 in revenue
and spent about $170,000 in the Arizona economy. Total attendance at these film
festivals was estimated at 19,800 for 213 films. These festivals reported a total of
eight full time jobs and 230 volunteers.
Runaway production, where films to be shown in the U.S. are produced outside of
the U.S., is a national phenomenon. Runaway production occurs because non-
U.S. locations, such as Canada and New Zealand, are less expensive than U.S.
locations. As more film productions are lured outside the U.S., the number of film
productions taking place in the U.S. is dwindling. As a result, there is intense
competition among the states trying to bring film productions to their state.
ESI Corporation Arizona Department of Commerce
December 2004
Analysis of the Film and Video Industry in Arizona
52
In order to lure film productions, states have undertaken aggressive advertising,
incentive, and marketing campaigns. These efforts have resulted in revamped
websites which include photos of locations, information on permits and
regulations, and directories of local technicians/crew just to name a few.
Financial incentives are also being offered. These incentives include sales tax
exemptions, income tax credits, and low-interest loans for film production
activities. In addition, certain states have helped develop the local film
technician and crew jobs as well as those companies that provide equipment to
film productions. Nationwide marketing and previous filming experience has
proven to be an effective means to increase word of mouth which appears to be
one of the primary factors that producers rely on when considering a location.
The states analyzed in this report consider the film industry as a major
contributor to their economies because film production tends to bring money into
the state from out-of-state sources. In Colorado, for example, about 75% of
production company receipts came from out-of-state sources during 2001. By
comparison, based on surveys conducted by ESI, only 21% of Arizona production
company receipts came from out-of-state sources. As the number of film
productions taking place in Arizona has dwindled in recent years, Arizona
production and supplier companies have been forced to go where the work is.
Currently, a majority of work within close proximity to Arizona is located in New
Mexico.
New Mexico is one of the more recent examples of the dramatic impact the film
industry can have on an economy given a certain mix of incentives, advertising,
and accessibility of information. Near the end of 2002, New Mexico enacted
legislation calling for sales tax exemptions, income tax credits, and no -interest
loans on film productions taking place in New Mexico. The result was a ten-fold
increase in economic activity in the state. In 2002, the film industry spent about
$8 million in New Mexico. During 2003, the first year the incentives took place,
film production picked up dramatically and spending reached approximately $80
million. Indeed, if film production spending in New Mexico can go from $8 million
to $80 million in one year, there is no reason to believe this could not happen in
Arizona.
The main concern of Arizonas resident film industry is the apparent lack of